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Just like having credit card brings us to a new world by allowing us to spend on dining at lavish restaurants, movie tickets, travel tickets and plenty more, similarly default in payment of bills drown us financially. There is no harm in having the credit card but one has to be calculative when it comes to spending via the cashless instrument. But, most of the people generally splurge around with credit card and end up inflating the bills to such an extent that they find it tough to pay the same. So, don’t play with fire as the ill effects can be severe. Below are the consequences that you have to face if you default on credit card payment.
Late payment penalty
The first and foremost consequence that you face with delay in credit card payment is the late payment penalty that can range from Rs 200-1,000 across banks in India. It may not sound a very big amount for some people. But the ones with less income and more household expenditure can find it hard to deal with. Even if you make payments of two months together, you would not be able to avoid the late payment fee if you have defaulted.
Rise in interest rate
If you keep on spending via credit card despite defaulting on the payment, the interest rate on credit card EMIs, cash withdrawals via ATMs and even on the purchases may go up, raising the possibility of further inflated bills.
Reduction in credit limit
If you default excessively on your credit card payments, then the credit limit can get reduced and thus would restrict your spending capacity in the future.
No interest-free credit period
New credit cardholders can get an interest-free period of 20-50 days depending on the scheme applicable on the specific card. For instance-If your first statement for the bill period of 1st June-30th June is generated on 1st August and is due by August 15, then you can get away from interest if you make the payment on or before the due date. But after that, applicable interest charges will be deducted.
Credit score dampens
With continuous default in credit card payment, your credit score takes a beating. The worse effect of poor credit score is that your future loan application for home, car and personal needs can be easily denied by the bank, which update your defaults to CIBIL, a credit information company in India. Even if the loan gets accepted, the interest rate offered by the lender will be much higher than what would be available to a customer with a good credit score.
Face up with loan recovery agents
If you fail to make payment of your credit card dues for 90 days, the case will get forwarded to the in-house recovery division of the bank or the third-party recovery agencies. These agencies will constantly visit or call you with regards to the recovery of your credit card dues.
So, be judicious while spending on credit card to not let the bills go out of your hand. Assess your requirements properly and then go about the spending. If you are struggling to pay credit card payment on time, you can ask the bank to schedule your payment to a date on which you can pay.