When Is Credit Card Payment Considered Late?

A credit card can be a powerful asset in your portfolio if it is used with proper planning and budgeting. Settling in full before the due date, utilizing the benefits in a simple and safe manner, and maintaining a good credit score, is how you make your credit card work for you. It can be hard to keep a track of every other bill you have and troublesome if you use more than one credit card. Even if you planned on paying and settling your outstanding in a timely manner, you still somehow default on the payments. There can be plenty of reasons why you default on settling your credit card bill like,

Waiting till the last day of the due date and then making the payment.
Usage of the credit card over the credit limit and defaulting on payments due to non-ability to pay back.
Not using digital payment mechanisms or overseeing errors in the report.
Stuck between the Due date and the Billing date.

Defaulting on your credit card bills is not a small thing, you are forced to face heavy charges on the bill, your credit score is impacted and, in some cases, people fall into debt traps. Therefore, it is crucial to settle your credit card bills in a timely manner. People often remain in doubt that when they are supposed to settle their bills. They also overlook the finance charges and only care about the late payment charges. Therefore, today we are going to talk about that when your credit card payment is considered late and also how to protect yourself from heavy charges.

Cases When Your Credit Card Payment May Be Considered Late

Every credit card has a billing period, and at the end of the billing period, the banks send you your monthly statement which included a summary of the transactions that you did with your credit card in the past month. With every billing period, there is a due date. You are supposed to settle your debt on the credit card before this due date. The due date for every credit card is different, which is based on the interest period. The interest-free period may range from 20 to 50 days. Let’s now understand when your credit card payment is considered late:

Paying lesser than the Minimum Amount Due:

Every credit card specifies a minimum amount that has to be paid in a statement cycle. The amount varies from card to card, you can check the same in your statement. If you pay below the Minimum amount as specified then your payment is still regarded as late. You will continue to face the late payment charges and finance charges on the amount. Therefore, it is advisable to at least pay the minimum amount so that you don’t have to face the late payment charges. You will, however still continue to incur the interest rates on the outstanding amount till you settle the same.

Ignoring the settlement days:

It is always advisable to make digital payments as there are quick and easy to make. However, if you are using any other method on the very last day of the due date and the payment method takes a few days to settle, then your payment is regarded as late. However, RBI has issued that credit card agencies and banks have to give 3 grace days to the cardholders so that the transaction gets settled. But if it takes more than three days the payment is late and you will face the charges. Therefore, always use a quick payment method to settle the payment.

Differences in the Time zone:

If you are living in a different time zone and your card issuer is from a different time zone, then the difference between the two may become a factor in late payment. Therefore, if you are late as per the card issuer’s time zone, then the payment would be considered as late.

Impact of late payments on your credit card:

When you default on the payment or even minimum payment on the credit card, you are supposed to face heavy charges and interests on the due amount. Following are the consequences you have to face once you default on your payments:

Bad credit score:

Once you default on your credit card bills, you face tons of charges, and therefore, your credit score is also impacted. However, the Banks generally do not report your late payment to the credit score bureau if you are able to settle your debt within 30 days. If, however, you still can not pay the bank will report the same to the bureau and your credit score will get lowered.

Additional Charges:

If you are not able to pay even the minimum amount due for your credit card, then the bank will charge a late payment charge. This charge depends on how much you owe. The bigger the amount you owe, the higher would be the charge.

Also, you will face finance charges on the outstanding amount that owe to the bank. These charges would keep on increasing till you make the payment to the bank.

Decrease in credit limit:

If you are unable to pay your bills on time, again and again, the bank will reduce your credit limit. This will act as a barrier so that you don’t use the card excessively.

Card Blockage:

If you are not able to pay back to the bank over a period then sometimes, you might not be able to services and benefits of the card anymore till you settle the debt you owe. Unfortunately, after some time, your card will be blocked but you would still owe the amount to the bank.

Conclusion:

You must have got an idea about what happens when you are unable to pay back and settle your credit card bills. Using the card excessively will only fetch you lots of charges on the card. Therefore, it is advisable to follow these rules when using a credit card so that you don’t have to face any consequences:

Never use your credit card excessively and only spend an amount that you can afford to pay later.
Use the automatic bill payment feature so that in case you forget, the bills will be automatically settled.
You can also try to use credit cards which generally have lower finance charges.

We hope the article was helpful to you, drop your comments in the comment section below. Also, if you have any doubt, let us know!

When is Credit Card Payment Considered Late?