Just like any other financial tool, a credit card can be a boon or a bane for you, depending on how well you handle it. While using a credit card may be a little tricky for a few, it is not a challenge to maintain your credit card score while using your credit card. All you need to do is avoid late credit card payment of your bills, and you will be all set.
Let’s take a look at some of the common reasons that lead to late credit card payment, and the reasons as to why you should get over those reasons and still complete your credit card overdue.
Situations Leading to Late Credit Card Payment
Now, there may be a few reasons that would lead to credit card delay payments. However, no matter how chall it gets, you should always try to overcome these reasons and not delay your credit card payments. We have listed down a few situations that would lead to delayed repayment-
- Insufficient funds – There may be situations when you would spend an excessive amount considering your credit limit. However, you might not be able to repay the amount even when you receive your salary (this would certainly happen because you spent more than you earn). Such situations are not too difficult to avoid because you would already have a track of your cash inflows and outflows. Hence, you should only spend around 60% of your credit limit and not more than that in order to be able to repay the amount later.
- Postal delays – If you haven’t opted for online receipt of your bills, then your bank would send your bills to your residential address by post. In such cases, there is a high chance that your bills may get misplaced or get delayed in reaching you. This would eventually lead to late credit card payment. Hence, it is recommended to turn on your online notifications and to keep a regular check on your email for your credit card overdue.
- Procrastination – A lot of people tend to wait till the last minute to pay their bills. While it makes no difference if you pay it before your due date; it is always a better idea to make the bill payments well in advance. This helps you stay away from the risk of missing on the bill payment and leaves no chance of being liable to pay heavy interest charges for late credit card payment.
- Due date – Even though it is less likely to happen, there may be a few instances where you would get confused with your due date, and eventually miss the payment of you credit card bill. Hence, it is advised that as and when you receive your monthly statement, you take a deeper look into the billing date and payment due date and set reminders accordingly.
Missing a credit card bill is a bigger deal than you would actually think. No credit card company would get behind your back for payment reminders; hence, you need to be alert enough to realize all your billing due dates and make the payments well before the last date. Remember, it is better to pay in advance than to pay extra. Here’s why!
Reasons to Avoid Late Credit Card Payment
We have explained a few reasons why you should not delay paying your pending credit card bills-
- Late fee charges – One of the major reasons that you should avoid paying your credit cards bill after the due date is to keep away from paying the late fee charges. Banks charge high penalties for late credit card payment, and this is an expense that can be avoided very easily.
- High interest rates – Upon non-payment of the credit card bills by more than 60 days, the credit card companies charge interest rates as high as 30% of the credit card overdue. This high interest rate is also applied to the new purchases that you’d make using your credit card. If you continue doing this, in almost no time, the interest on your credit card bill would be more than your actual credit card bill!
- Negative impact on credit score – Making late credit card payments lead to a lower credit score, which cancels out the major benefit that a credit card has to offer. Your credit score can be improved by effective usage of your credit card and timely repayment of your bills. It is necessary to have a good credit score in order to ensure that you are eligible for higher loans in the future. Not paying your bills in time will eventually hamper your financial health.
- Reduced credit limit – Banks/credit card issuing companies have the right to reduce your credit limit upon multiple defaults in payments or frequent late credit card payment. This will hamper your purchasing power and your financial wellbeing will be disturbed.
- Interest on outstanding balances – Contrary to what most credit card holders think, you are not liable to pay only the minimum amount due out of your total credit card bill before the due date. Even though it is widely believed that paying only the minimum balance would not make you liable for interest charges, it is not true. In reality, you will be paying interest on the outstanding amount starting from your due date. Hence, it is strictly advised that you pay your credit card overdue in full.
- No interest-free period – Defaults in your credit card payment can lead to withdrawal of your interest-free period. ‘Interest-free period’ is basically the time period when your bank actually finances your purchase without any interest. This period can last anywhere between 20-25 days. Late credit card payment will lead the bank to withdraw this facility from your account.
What Should You Do To Avoid Late Credit Card Payment?
Looking at the major negative impact that late credit card payment can have on your financial health, it is not something that you can take chances with. Hence, we have curated a list of things that you should include in your regular activities in order to avoid late credit card payment-
- Sign up for the auto-pay feature on your credit card’s mobile application/online portal
- Set up timely reminders for your due dates
- Do not wait until the last minute to pay your credit card overdue
- If you are really short of finances, then pay at least the minimum amount due before the last date. The remaining balance can be paid in the interest-free period