1. Missed a credit card payment? It might seem harmless, but there are significant consequences. From higher charges to negative impacts on your credit score, here’s why paying your credit card bill on time is crucial.
2. Interest Rates (Finance Charges)
When you don’t pay your full credit card bill, issuers charge an interest rate on the outstanding balance. This finance charge applies to the amount left unpaid after the due date, including cash withdrawals and any post-due transactions.
3. Late Payment Fees
Failing to pay your bill on time can result in a late payment fee. According to the Reserve Bank of India (RBI), this fee is applied to the outstanding amount if payment is delayed by three days or more. Expect this fee in your next bill.
4. Minimum Due Amount Myth
Think paying only the minimum due amount means no interest? Think again. You’ll still be charged interest on the unpaid balance starting from the due date. To avoid this, aim to pay the full bill.
5. Loss of Interest-Free Period
Your credit card’s interest-free period can be up to 20-50 days. But if you miss payments, this benefit vanishes, and you start accruing interest on your outstanding balance from the transaction date.
6. Impact on Your Credit Score
Your payment history is a crucial factor in your credit score. Missed payments can cause significant damage, making it harder to get approved for loans or other credit in the future.
7. Reduced Credit Limit
Consistently missing payments can lead to issuers lowering your credit limit. This can restrict your future spending and hurt your credit profile, especially if your credit score drops or you often exceed your limit.
8. Conclusion
To avoid these extra charges and potential damage to your financial health, always aim to pay your credit card bill on time. Not only does this help you avoid unnecessary costs, but it also showcases responsible financial behavior.