What happens if credit card bill is not paid in India

 

What happens if a credit card bill is not paid in India

There are three key reasons why you should not miss a single payment on your credit card.

The first reason is that the interest rates on your credit card delayed payments are really really high here is a brief screenshot of the credit card interest rates for various different banks as you can see it can go almost up to 50 per cent per annum. 

which means if you have a credit card outstanding of 10 000 rupees at the beginning of the year by the end of the year you will have to pay 15 000 rupees 10 000 for your purchase and 5 000 in interest

Let's compare these interest rates to a personal loan, a personal loan is also expensive it can vary between 10 to 12 per cent but when you compare that to a credit card which can vary from 24 to 50 per cent 

A credit card interest is extremely high so you should be very very very when you are using a credit card and you may tend to default on a payment 

So let's take an example that you have made a purchase of about 10 000 rupees and your bill says that you have to pay 10 000 rupees on January 5th now you probably don't make that payment on January 15th you make another purchase of around 5000 rupees on February 5th you make another purchase of around 2000 rupees 

You still have not paid your bill which means that when you're going to get your next bill on February 5th you will have to pay interest on the 10 000 rupees that was outstanding the previous month you also have to pay interest on the 5000 rupees and 2000 rupee purchases that you made during the month because you have not paid your previous bill 

So what that comes up to is that you have purchases of about 17 000 including the purchase from the previous month for the 5000 rupee purchase since you made it 10 days into your billing cycle you have to pay interest on that for 20 days for the 2000 rupee purchase since you made that purchase 20 days into your billing cycle you have to pay interest for about 10 days that in total comes to about 280 rupees in interest if I'm assuming a 2 per month interest on this amount

This can escalate really really fast if you continue not to pay that amount this number will only exponentially increase in addition if you default on your payment for multiple months the bank can choose to actually increase the interest rate that you are paying on the outstanding amount 

The second thing that it affects is your credit score or the civil score as it is called in India if you delay your payment more than 30 days that means your credit score will get an impact and that will reflect in your credit history for seven years 

So what is a credit score or a civil score a credit score or a civil score is a score that is used by banks and financial institutions and also these days telecom operators to determine what is your creditworthiness is it useful to give you a loan is it useful to give you a credit card is it even useful to give you a telephone connection or a mobile connection 

Typically your credit scores are between 300 and 900 and to be eligible for any kind of loan your credit score or your civil score should be above 750. anytime it goes below 750 either you will not be eligible for the loan or there will be a lot more scrutiny 

So every time you delay your credit card payment by 30 days your credit score takes a hit in addition your Cibil scores also determine how much interest rates you will actually be paying when you avail a loan from a bank 

For example, you're trying to avail a home loan the published home loan rate is about 8 if you have a good credit score you would get it at eight per cent or lower 

If you don't have a good credit score that means that the bank could choose to give you a higher interest they may charge you even 9 per cent or ten per cent that is the power of your credit score or your Cibil score to reiterate 

If you delay your credit card payment by 30 days or more every time you delay it your credit score or your civil score takes a hit and that will reflect in your civil score for almost seven years and to get back from that state is extremely difficult 

The third point is that you can have a case registered against you, If you delay your credit card payment by three cycles which are by 90 days the bank can choose to register a case against you under the negotiable instruments act or the payment and settlements act the bank could also choose to sell your credit card loan so to say to a debt collection agency 

You may have heard horror stories about debt collection in India, where they would come to your house and create a scene or even get violent at times so to summarize the consequences of not paying your credit card bill on time are quite high 

So if you delay your credit card payment by one to two cycles or one to two months it means that you will have late payment fees will your credit score also takes a meeting if you delay it by three months you will have an increased late payment fee the bank could choose to increase the interest rate as well you will you 

Your credit score will continue to take a hit as well as the bank can close your credit card and if it gets more than three delays like I mentioned they can sell your loan to a debt collection agency your credit score is significantly impacted which might mean that in the future you may not be able to get a loan at all as well as your late payment fees go up significantly 

Now these were the negative consequences there are ways that you can actually avoid this by setting up some processes and so on let me know in the comments if you would like to know how you can avoid delaying your credit card payments.

Also read: Credit score myths that can harm financial health 

Also read: Good reasons to use credit card instead of cash 

Also read: HDFC Bank Infinia Credit Card Review 

Also read: Why should i use my credit card 

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