Many of you will surely agree on the fact that when you are in urgent need of money, credit cards are a big relief to have. However, it would not be wrong to say that your most favorite credit card can also turn into a curse, if you don’t know how to use it wisely. Yes, soon a situation will come wherein you will find yourself in deep debt, if you spend unwisely. Thus, when your bill increases to a point, where you are unable to pay it back, things can turn quite worse for you financially.
So, let’s take a look below to know about the consequences that lead to default payments.
Consequences that lead to default payments:
Due to any reason, if you default on the payment, or pay after the due date or make the minimum payments, you will be charged with late fee for showing the default payment in monthly next bill. Well, this situation will occur, even if you pay for the two months all together.
Higher Interest Rate
In case you have made a default payment, and still continues spending on the card, for all your cash withdrawals and EMIs a higher rate of interest will be charged. And, this thing is applicable for the regular purchases also.
Reduced Credit Limit
In fact, your credit limit will also be reduced in order to control your spending capability for all the future transactions.
Withdrawal of Interest-Free Privilege:
Not only this, in fact in case of default payment, the facility of credit with no interest privilege will also be withdrawn or permanently stopped on your credit card.
Bad credit score
Moreover, these payment defaults that you make are informed to the CIBIL by your bank. Thus, these defaults will affect your credit score very badly and cause difficulty for you to avail the loan or new card in present as well as in future. You will be charged with higher rate of interest, in case you have low credit score.
When an individual does not make his credit card payments for a period of 90 days, his case is sent to the recovery section of the bank or to the third party agency. Well, you will constantly be followed up for recovering the due payment.
Always Have the Right approach
In spite of having numerous customer centric rules introduced by Reserve Bank of India, there is no denying on the fact that it is quite tough to handle the recovery agents. And, the best way to handle them is to take a diligent attitude. These above consequences can lead you towards the default payments, hence can affect your financial plans adversely. And, once your credit score gets affected, you need a long recovery time for that.
When you are unable to make payments on time, you may face the lawsuit from the creditors for the account in which you are having the defaults. Thus, the best way to avoid these legal hassles or complications is to inform your bank that why you are unable to make the payments. Once you communicate your issue, there is a possibility that bank will reschedule your payment date to a time, when you are in a situation to make the payment.
In fact, lenders also help you out with providing the payment schedule that actually allow you to pay the money in easy EMIs, so that it will be easier on your finances.
Once you have cleared all your due payments, you first thing that you need to do is to ask the bank for the certificate of account closure. Yes, you need to ask the bank regarding informing about the completed payments to the rating agencies.
Well, with the help of taking the conscious and responsible measures so as to avoid the defaults on payments such as going for personal loan, converting loan to EMI, asking for a lower interest rate or last but not the least transferring the balance to another card will also help you a lot to overcome from this situation.