Explained: What All Happens If You Don't Pay Your Credit Card Bills On Time

One of the biggest financial sins you can commit is missing the timely payments of your credit card bill. Whether the reason is overspending or an ongoing financial crunch, irregularities in your credit card repayment not only push you towards a debt trap, they also come with multiple other adverse financial implications.

That¡¯s exactly why it becomes imperative for credit card users to adopt disciplined usage and repayment of their credit cards. Otherwise, sloppy usage and erratic repayment of credit card bills can prevent them from turning into a boon in your financial life.

Here are the multiple ways in which failure to repay credit card bills on time and in full can harm your financial health:

How Irregular Credit Card Payments Harm Your Finances

adobestock

1. Late payment fees and finance charges

A late payment fee is charged when you fail to repay even the minimum amount due by the due date. Credit card issuers generally keep 5% of the total bill amount as the minimum due amount. Additionally, any existing EMIs on your credit card along with various applicable charges will also be added to the minimum amount due. The late payment fee levied on the non-payment of the minimum amount due can be around Rs 1,000-1,500 per billing cycle.

Also, remember that paying anything less than the total credit card bill¡¯s dues leads to the levy of hefty finance charges going as high as 40%-49% p.a., on the unpaid bill amount. While timely payment of the minimum amount due can save you from a late payment fee, you will still be charged the applicable finance charges on the unpaid outstanding amount.

2. Damages your credit score

shutterstock

Another pitfall of not repaying credit card bills on time and in full is the damage it has on your credit score.

A credit score is a three-digit numerical representation of your creditworthiness. As your credit score is calculated on the basis of your credit repayment history mentioned in your credit report, committing irregularities in your credit card bill repayment can pull down your credit score, which can make it difficult to get loans or credit cards in the near future.

Also, if your credit utilization ratio frequently breaches the 30% mark, this can prove to be further detrimental to your credit score. A reduced credit score lowers your loan and credit card eligibility and approval chances in future.

Also Read; Warning Signs Of Approaching A Credit Card Debt Trap

istock

3. Interest-free grace period gets removed

For the unversed, interest-free period refers to the duration between the date of making your credit card transaction and the due date of its payment. This period can generally range anywhere between 18 -55 days. Credit card transactions carried out during this period do not attract interest costs in the form of finance charges, as long as the dues are repaid by the due date.

However, in case you fail to timely pay your total credit card dues, lenders may revoke your interest-free period and levy finance charges on fresh credit transactions until the entire outstanding dues are repaid. Hence, your fresh transactions in the subsequent billing cycle will also attract the applicable finance charges.

shutterstock

4. Interest-free period gets removed

Credit card issuers tend to provide pre-approved loans and credit card offers based on your credit score and credit profile. As irregularities in your repayment history can result in a poor credit score, this could make you ineligible and deprive you of such pre-approved offers and the associated benefits.

Why does it matter? Not only do such offers generally have better product features, lower processing time and even lower costs, but they also help you get a fair idea of your loan and credit card eligibility and may also help in negotiating with other lenders to get a better deal.

Also Read: Steps To Take If Your Credit Card Is Lost Or Stolen

For the latest and interesting financial news, keep reading Indiatimes Worth. Click here.