It’s easy to miss a credit card bill payment, especially if you’re handling too many things at the same time and have many bills spread across different due dates. If you have missed a credit card payment, it can be expensive with the interest fees, late penalties and other charges. The quantum of late payment charges would depend on how late the payment was made and also the terms and conditions set by your credit card issuer. For instances like these, be prepared to incur a late payment charge, penalty interest fees and potential damage to your credit score.
If you are under a financial crisis, the idea of delaying your credit card payment may seem justified. However, missing credit card payments can have a severe long-term impact on your financial status in the eyes of credit issuers.
How to Handle Missed Credit Card Payments?
The most common reasons why you may miss your credit card payment are:
- Missed the due date
- Financial crunch
Whether it is one of these reasons or another, you can still remediate the issue of non-payment and ensure minimal damage. Let’s consider a couple of scenarios to understand this action plan better:
You forgot to pay your credit card bills – If you have been regular at making your credit card bill payments and happen to miss a payment as a one-off incident, you can get in touch with the card issuer. You can request an exception by showcasing your track record and pay the outstanding bill amount at the earliest. In some cases, the bank or issuer will accept to take a late payment without charging a late fee. This is considered especially when a non-payment is a one-off incident.
You don’t have to worry much about your credit score if this is the first incident. However, you will have to be cautious about a repetition of such an incident in the future as it can immediately impact your credit score.
You lack the required funds to pay credit card bills because of a financial crunch – If the primary reason for delayed-payment of your credit card bill is a financial crunch, you must ensure to discuss the situation with your bank at the earliest. Most card issuers would provide an alternative for settling the credit card payment. This could include a personal loan or alternative repayment mechanisms such as monthly EMIs for making a full card payment.
This will help in reducing the interest burden on the total outstanding amount and ease your financial crunch over time. You can also opt to pay the minimum balance on the card bill while keeping the remaining payment to be made in the next cycle.
All these can only be temporary solutions since making minimum payments on an ongoing basis can have serious credit consequences like a poor credit score. Also, paying the minimum amount will mean interest charges on the remaining mount and this is calculated from the due date. This can prove to be costly and may hamper your financial situation further.
The ideal way out is to clear all your dues as far as possible.
Here’s Why you should avoid late credit card payments
Late Payment Penalty – It makes sense to avoid late credit card bill payments since it attracts hefty late fees from the banks and credit card issuers. As per RBI norms, a late fee is charged in case a credit card holder does not clear off dues after three days beyond the due date. The late fee gets charged to the next bill cycle and can accumulate into a big amount over time.
Higher interest rate – If you have not made the credit card bill payment beyond 60 days of the due date, a penalty interest fee is generally levied by the credit card issuer. Many credit card issuers charge a heavy penalty rate which can be around 30% of the outstanding bill value. The higher interest may also be charged on new purchases or any fresh cash withdrawals made. This is applicable even if you have paid the credit card bill on time since the previous six consecutive months.
No Interest-Free period – If you have paid only the minimum due amount or have missed a card payment, the outstanding balance gets carried forward. Once you have used the rollover facility, the interest-free period generally lapses. Interest is then charged on the outstanding value and also on subsequent purchases. The interest-free period gets reinstated after the entire bill amount is cleared by you.
Debt collection hassles – Credit card issuers make sure to collect all dues by any means once an account is tagged under collections for many months. There could also be additional charges demanded by the issuer and you may have to shell it out as it’s legal.
Credit card companies tend to repeatedly chase a defaulter and in case he/she fails to make the payment despite companies’ efforts, the card issuer will tag the credit account as default in the individual’s credit report.
Bad credit score – Banks and other issuers always check for the credit score of an individual before granting a loan or a credit card. The credit score tells a person’s creditworthiness and borrowing pattern or behaviour.
A credit score calculation depends heavily on whether all credit dues have been paid on time. A consistent credit bill payment and cleared dues can significantly boost the credit score of an individual. Hence, unstable payment history can directly impact the credit score as banks consider all defaults within the credit information. Thus, the chances of a loan rejection or credit card rejection are higher.
Deactivation of credit card
In case you get your card deactivated, you still have to pay the outstanding amount along with interest. It makes sense to consider EMI options or go for a personal loan to pay off outstanding amounts on credit cards rather than defaulting. If you keep it pending, it could result in higher interest charges.
If you feel that you may delay your bill payments more than once, ensure to take all the precautionary measures while choosing the right credit card. Have sufficient notifications and automatic payment reminders in place. This will help you in making payments within the due date. But if you end up missing one credit card payment, try to make the minimum payment at the earliest and contact the issuer for a refund of the fee. The more you delay, the harsher the consequences in this regard.