6 Reasons you Should Avoid Late Credit Card Payment

Credit cards like any other assets can be a boon if you know how to handle it well.

On the one hand, it increases your purchasing power, and on the other hand, it can also lead you into a debt trap. Thus, it becomes a must to handle the credit card payments or else it can doom your income and savings.

Let this post help you know some of the significant reasons why you should avoid late credit card payment.

However, before you get to know those reasons to avoid late credit card payment, let’s list out some situations that may lead you to delayed payments.

Situations that may lead to late credit card payment

• Overspending or failing to make timely credit card payments due to lack of sufficient funds
• When you miss due dates because of depending on physical bill owing to postal delays
• Waiting till the last due date to enjoy the interest-free period leading to a missed payment
• Getting confused about your bill generated date and payment due date

Missing a credit card bill date is a bigger deal than you may think. Your credit card issuing company or bank won’t come to your doorstep to collect their repayments.

They will take actions behind the scene for sure. Its consequences may affect you for months and years.

Leading consequences of late credit card payment

• Late fee

If you missed paying your credit card payment, your service provider would levy a hefty late fee in your next credit card bill. The Reserve Bank of India (RBI) has directed all banks to charge late fees only after more than 3 days after the due date. However, it’s better not to take chances and resort to all steps to repay the credit card bill by the due date.

• Higher interest rate

The interest rate on the outstanding amount of your credit card will also keep increasing. Yes, if you don’t pay at least the minimum due by the payment date, it will go up. The increased interest rate will be applicable on cash withdrawals and other spends. It will reflect if you use your credit cards after defaulting on the bill payment.

• Withdrawal of the interest-free credit duration

Defaulting on your credit card payment can also lead to the immediate removal of the interest-free credit period. As per your lender, the interest-free period could be anywhere between 20-50 days. It is a huge thing as the bank finances your purchases without asking for any interest. Nonetheless, it will be withdrawn if you indulge in the late credit card bill payment.

• It will affect your CIBIL Score

Your CIBIL Score determines your creditworthiness. It is utilized by banks and other lenders while analyzing your future loan application. If you make late credit card bill payment or default it, it will affect your Credit Score for sure. As a result, you may find it tough to get a credit card, or a new loan application approved.

• A decrease in your credit limit

Are you a frequent defaulter or repeatedly make late credit card payments? Then you may see a reduction in your overall credit limit. Needless to mention, it will adversely affect your spending power in the future.

• When you pay just the minimum dues

Are you a credit card user who clears only the minimum amount due and think that no interest would be charged on your remaining outstanding amount? You are wrong! In reality, you will be paying interest on the outstanding amount beginning the due date. The inserts rate could be as high as up to 45% annually. Thus, it is a fair practice to pay the full amount by the due date and avoid paying excess interest.

Some of the reasons to avoid the late credit card payment are listed to help you understand why it’s a must to pay the bill by the due date. You should follow the same and be a smart credit card user.

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