March 17, 2025
Delaying credit card payments may seem like a viable option, especially during a financial crisis. However, beyond just late payment penalties, missed credit card payments can lead to long-term financial setbacks. The following are key reasons why you should always strive to make timely credit card payments.
1. Heavy Late Payment Fees
Banks and credit card issuers impose substantial late payment penalties. As per RBI regulations, if a credit cardholder fails to pay within three days of the due date, a late fee is charged. This penalty can be quite expensive and gets added to the next billing cycle.
2. Increased Interest Rates
Credit card companies often charge a higher penalty interest rate if a payment is overdue by more than 60 days. Many credit card issuers impose a penalty rate of up to 30% on the outstanding balance. Even after making timely payments for six months, the increased interest rate may still apply to future transactions and cash withdrawals.
3. Loss of Interest-Free Period
If a consumer misses a payment or pays only the minimum due, the remaining balance carries forward. This results in the loss of the interest-free period, meaning both the outstanding amount and new purchases will start accruing interest. The interest-free period is restored only when the full outstanding amount is cleared.
4. Debt Accumulation
Even if your credit card is closed, you are still liable for the outstanding balance plus interest. Opting for EMI conversion or a personal loan can be a more manageable way to repay the debt at a fixed interest rate. Unpaid balances can result in interest accumulation, sometimes exceeding the original amount borrowed.
5. Collection Efforts and Additional Fees
If an account remains unpaid for several months, credit card issuers may take aggressive collection actions to recover the dues. They may also charge additional fees, which can significantly increase the total amount owed.
6. Negative Impact on Credit Score
Every financial institution checks an individual’s credit score when processing loan or credit card applications. Missed payments lower your credit score, reducing your chances of getting loans or credit approvals in the future.
These six reasons highlight the importance of paying your credit card bills on time to avoid financial setbacks.
