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Credit Card Late Bill Payment Consequences in India

Credit cards allow you the convenience of spending on credit. This means that the lack of availability of cash at that time is not much of a concern for a credit card holder since he can spend and purchase on credit and pay conveniently at a later date.

But using a credit card calls for being responsible when it comes to credit card payments i.e. making the due payment by the bill due date. Being irregular with your payments or failing altogether to make payments of your credit card dues can have consequences detrimental to your financial plans and management.

Some of these consequences are: –

Paying late fee on your credit card bill

If you make the payment after the due date or pay less than the minimum amount due on the present credit card bill, the bank will charge late fee for the payment default in the next bill that gets generated. Even if you combine two months payment together, there is no escaping the late fee.

Hike in the interest rate

If you have already made a payment default on your credit card and continue to make purchases from the card in spite of that, the interest rate on services like cash withdrawals or credit card EMIs might be hiked. Even the interest charged on regular purchases might go up.

Loss of credit limit

This is one of the biggest consequence where excessive defaults in card payments results in reduction of credit limit which restricts your spending power for future transactions.

No interest free credit period

For a new card, banks provide an interest free period of 55 days where you need to pay the bill in full. For example, let’s say that your first statement for the bill period of 1st April – 30th April gets generated on 1st June and is due by June 25. If you make the full payment before June 25, no interest will be charged on it. Thereafter, this interest free period will usually be 10 days between the payment due date of the current bill and next month’s bill generation date.

Defaulting on card payments may result in the interest free credit period privilege being withdrawn or permanently disabled from the card.

Your credit score gets affected

These defaults that you make is updated by the banks to CIBIL which negatively affects your credit score. A knock down effect of your credit score getting affected is that any current or future applications you make for new credit cards or loans might be rejected. Specifically in case of loans, a bad credit score can result in loans being offered to you at interest rates which are much higher than the loan rates predominant in the market at the time.

The hassle of dealing with loan recovery agents

If you fail to make payment on your credit card’s due payment for 90 days, the case gets forwarded to the bank’s in-house recovery division or third party recovery agencies who will constantly follow up with you for recovering the credit card due payment.

Now although the Reserve Bank of India has laid down strict and customer-centric guidelines (section 6.3: Fair practices in debt collection), there is no denying that it is still a big hassle to deal with recovery agents.
Being diligent is the right approach

The combined magnitude of these consequences can adversely affect your financial needs and your spending power and the hit that your credit score takes can take a significant amount of time to recover. So, the sensible thing is to be prompt with your credit card payments at all times.

However, if your circumstances do not allow you to make payment on time then you should get in touch with your bank about it. Communicate the issue that you are facing so that the bank can reschedule the due payment to a date when it will be possible for you to pay. Your bank might even be able to work out a payment schedule which allows to pay the total due payment in installments and is easy on your pocket.

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