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Reports suggest a 1.78% rise in credit card wrongdoings in the year 2018 indicating that there are more credit card defaulters or individuals making late payments towards credit cards.
Not paying credit card dues before due date most often comes down to the lack of proper financial planning. Users can easily avoid such charges and accumulating credit card dues by opting to make a credit card payment online. Most importantly, they should know why it is imperative not to miss credit card payments.
Reasons why you should not miss credit card payments
- Bad impact on credit score
A credit score is an important factor of consideration that financial institutions look at while approving loans, credit cards, or any other similar credit-based financial product. An individual with a credit score around or above 750 is considered creditworthy to enjoy ready approval of their application. Now, making late payments or not paying the entire amount of credit borrowed using the credit card can cause a substantial drop in credit score. Contrary to this, individuals can use a credit card to improve their credit score by making timely payments.
- Inculcation of late fee in the bill
For cases when an individual fails to make timely payments of the credit card bills, a late payment fee is included into the credit card statement. Paying extra fee for late payments is an unnecessary and easily avoidable financial burden. Proper financial planning and utilisation of the credit card in a month can easily help meet the upcoming card dues.
- Added interest on the utilised credit
Financial institutions do not charge any interest for the utilised credit if the user makes the credit card payment online within the due date as mentioned in the credit card bill. In case the user fails to pay the total outstanding in full within the mentioned time frame, they are liable to pay interest charges as applicable on the unpaid dues. Note that interest rates on credit card dues are substantially and can make it difficult for the user to repay later on.
- Reduction of the interest-free period
Repeated late payments may compel the card issuer to reduce the grace or interest-free period. Such periods are extended to credit card users to help them successfully accumulate the necessary finances and repay the utilized credit within the due date. Not doing so in successive billing periods negates the purpose of the grace period and forces the issuer to reduce it.
Feature-rich credit cards like the Bajaj Finserv RBL Bank SuperCard necessitate users to maintain a healthy credit score and well-planned financial behavior to continue using its varied benefits such as a 90-day interest-free emergency loan, 50-day interest-free cash withdrawal, and more.
- Reduction in credit limit
A user defaulting on their credit card statement may find his/her credit limit reduced. Since financial institutions follow and understand their bill payment pattern, they may consider a lower credit limit to be more manageable for such users. It is up to the individual to pay his/her credit card bills on time to increase the credit limit and their purchasing power.
Missing credit card bill payments can impact the financial credibility of an individual. Considered as an errant financial behavior, it negatively affects the credit score of the user other than attracting additional interest rates on unpaid credit plus charges.
For any user, it is always advisable to limit their credit card spends up to an amount which they can repay in the upcoming monthly statement. Card issuers provide an added grace period over the billing period of 30 days to help borrowers repay the utilised credit. The best credit card features are extended only to those users who can successfully repay their credit card dues every month.