Paying your credit card bills on time is essential to keep your credit score high and avoid late payment fees. However, there is always something that comes in the way, whether it is sickness, travelling, or just a busy schedule, which stops you from paying bills on time.
Credit cards are mostly used for convenience but it is also a great way to build credit. So avoid missed payments when paying off credit card debt.
Because paying off credit cards debit on time helps prevent high-interest rates. If you use them responsibly, credit cards can be an excellent financial tool. This helps build your credit history, access emergency funds, and avoid debt when you need to make a big purchase.
What Situations Frequently Result In Late Payments?
Late payments occur when customers do not pay their bills before the due date. This situation arises if you are unable to make full payment.
Such scenarios occur due to the following reasons:
- Overspend and missed deadlines
- Waiting until the last minute for the interest-free period
- Dependency on physical bills
- Confusion between the billing date and the payment due date
Don’t Miss Credit Card Payments
Knowing the repercussions of a late credit card payment must have motivated you to make additional efforts to make on-time payments. Let us take a look at a few effects of late credit card payments:
1. Higher rate of interest
Credit card companies charge higher interest rates than other types of loans, such as home or auto loans.
In addition, credit card companies can also raise the interest rate if late payments happen.
While paying off a credit card balance may seem like a good idea, if a person does not pay off the entire balance before the due date, they will end up paying higher interest rates and will likely have a higher total amount owed.
2. Late fees
Paying the credit card bill beyond the due date will result in a significant late charge. So in your next credit card statement, you will see the late fee mentioned.
However, the Reserve Bank of India (RBI) has instructed banks to impose late fees only in cases when the payment has crossed more than three days over the due date.
You could avoid late fees altogether by making sure you always pay your balance in full each month.
3. Impact on credit score
Miss payments on credit cards, impact your credit score negatively because it shows that you are irresponsible with money or don’t make payments on time.
So make all payments to avoid this negative impact on your credit score. Because poor credit scores can prevent you from obtaining loans in the future.
Your credit report reflects everything that is included in your financial history. Since late fees are added to your account over time, it has a harmful impact on your credit score.
Try to avoid late fees as much as possible to maintain your credit score, so you get approved for future loans.
4. No interest-free credit period can save you
When cardholders are given a credit card, the time they are allowed to spend without incurring any charges is called the grace period.
The length of the term varies from company to company and sometimes changes based on how much you spend.
However, if you don’t pay the bills and the due amount carries forward to the next month’s cycle, no interest-free period can save you from late fees.
5. Decrease in credit limit
When cardholders repeatedly miss payments, their credit limit gets impacted. The credit limit may be reduced, which may limit the future purchasing power of cardholders.
6. Lose credit card rewards
All your card benefits are lost if you make a late payment. So, if your credit card account is past due, you won’t be able to redeem incentives.
Conclusion
The total of these effects will undoubtedly harm your credit score and hurt your financial situation. Therefore, it would be preferable if you try to make it on time and complete bill payments. Additionally, most banks offer credit card online bill payment facilities. And this a good way to pay off one’s credit cards quickly is to start paying them off early.