Credit card brings a plethora of advantages and disadvantages along with it. On one hand, it can prove to be a boon and on the other hand, it can be a bane to the credit cardholders. There are endless advantages of using a credit card, they offer reward points on the spending, convenience in borrowing funds, purchase protection, and hassle-free functioning. A credit card bestows a lifestyle to its members and helps in increasing their purchasing power.
The benefits of credit cards only come to fruition when they are used responsibly. The chances of leading the credit cardholders into a vicious debt circle increase when the credit cards are handled carelessly. The biggest mistake done by the card members is borrowing funds one after the other and not repaying the previous due amount in the Grace period. This article focuses on the consequences of the late credit card payment and how you should avoid this from happening throughout the time you own a credit card.
Disadvantages of Late Credit Card Payment:
- Higher Rate of Finance Charges: The late payment of credit card due bill attracts the chances of a higher rate of finance charges. The finance charges can shoot up to 49.36% annually. The higher the rate of interest the higher the chances of one to lead into a debt spiral.
- Bad Impact on Credit Score: The credit score is the one that gets highly impacted when the credit card due amount is paid late. The possibility to get a loan from the bank decreases and on missing out the due date repetitively can lead to the addition of the term defaulter in the credit card statement.
- Termination of Grace Period: The bank has the sole discretion to terminate your interest-free period in case you have defaulted several times. The grace period is a huge advantage to the credit card members since the bank is not charging any interest on the borrowed in that period. This period can go up to 21 to 51 days depending on the credit history of the cardholder.
- Late Payment Fee: The late payment fee is charged when the cardholder does not even pay the minimum amount of the due balance before the due date. On crossing the due date, the card members are charged with a late payment fee which differs from bank to bank. It can become burdensome to pay late payment fees along with the finance charge. On paying a minimum amount from the due balance the bank does not charge any late payment fee.
- Decline in Credit Limit: The spending capacity depends on the credit limit, higher the credit limit higher the spend limit. Repeated default in the due payment can lead to a decline in the credit limit which will ultimately affect the cardholder’s purchasing power.
- Paying only a percentage of Due Amount: People think that paying the minimum amount from the due balance can help them get less interest. In doing so, the cardholder is attracting troubles for the next billing cycle. You are accumulating interest starting from the transaction date and not from the payment due date. So, it is better to clear your dues before the due date.
Also Read: Everything You Need To Know About Credit Score
Ways to Avoid Late Payment:
We all know how difficult it is to keep up with the reminders in the busy schedule. This certainly can lead you to the pit holes of the credit market which can in a way make it more difficult to maintain one’s creditworthiness. You can opt for any of the below-given choices in order to pay the due amount without attracting any sort of distress in your life.
- Make the advance payment: Choosing this option can be beneficial to credit cardholders. If you have funds available it is best to make the payment in advance so that you don’t have to worry about the due date and the finance charges.
- Set-up Reminder: You can set up reminders in your phone which makes it easier for you to keep a tab on your payment due date. It’s better to set a reminder 3-4 days earlier before the due date so that you can pay-off the due amount swiftly.
- Auto-Pay Option: One can contact the bank either by calling on the customer care helpline number or sending a mail to opt for ‘Auto-Pay’ option or visit the bank’s branch. On opting for the ‘Auto-Pay’ option, the bank will deduct the due amount on a specific date and it will reduce the chance of missing out on the payment to zero. Auto-Pay option by far can be the option to go for.
- Payment due date: If you are the one who owns multiple credit cards, then you can call the bank and get payment due dates changed to one payment due date for all your credit cards or you can select one week in which all the due payments of each credit card can be paid off.
- Use third-party apps: You can also use third-party apps which store all the information about your credit card. Even if you are a multiple credit cardholder, apps like ‘Cred’, helps you manage all your credit cards in one place. This app helps you to pay your credit card bills.
Suggested Read: Should You Automate Your Credit Card Payment?
Bottom line:
When it comes to credit card payments, due care is needed otherwise it can bring a lot of worries and troubles to the table. Frequently defaulting the payment due date can lead to double charges: the first one is the interest rate and the second one is a late fee. Non-payment of credit card bills can adversely affect your creditworthiness which in the future will make it difficult for you to get any loan or credit card. Your credit score can worsen to the point that the financial institutions after going through your credit score can reject your loan application. If you do not repay the due balance then the banks can take rigorous steps against the defaulters and one can face legal proceedings as well. So our suggestion to all our readers is to use your credit cards responsibly and pay all your credit card bills on time.
