You must repay your credit card bills before the due date to avoid penalties. Banks offer quick short-term loans through credit cards and if you don’t repay them back on time or pay only the minimum due amount, you become a credit card defaulter due to the accrual of significant outstanding amounts.
Credit card defaulters usually need to pay a penalty depending on the terms and conditions of the bank. Moreover, it may also degrade their credit score and reduce their creditworthiness. Let’s find out what happens to the credit card defaulters in the article below.
What happens when you miss your credit card payments?
Negative impact on the credit score
Whether you own a free credit card or even a paid one, the benefits may get nullified if you make late or missing payments, and eventually, it damages your credit score. However, you can raise your credit score by using your credit card wisely and paying your payments on time.
To guarantee that you qualify for larger loans in the future, you must have a decent credit score. Your financial stability will improve if you make your bill payments on time. Also, you can apply for more credit cards in the future.
Blocked credit cards
You will be regarded as a defaulter if you don’t pay your credit card payments for six months. The bank will block your credit card, barring any further purchases.
Credit card interest rates can go as high as 30% of the outstanding balances when payments go unpaid for more than 60 days. Any future items purchased with your credit card will incur this high-interest rate.
Banks can access funds in your savings or other accounts to settle your unpaid dues. In the worst cases, banks may seize your properties or other assets to pay off the debt.
How to overcome a credit card default?
Your card issuer may accept a settlement for less than you owe if you are unable to pay the whole amount. If you can come to an arrangement, get it in writing before you pay. Once the payment is done, you must also get a written acknowledgement that you’ve kept half of the bargain.
You may file for bankruptcy if you are in financial trouble and have a lot of debt, especially credit card and loan obligations. Individual bankruptcy is governed by the Insolvency and Bankruptcy Code (IBC). If your debt exceeds Rs. 500, you may file for bankruptcy.
The court must confirm the applicant’s compliance with all predetermined bankruptcy requirements. Remember that if a compromise is not reached, all your assets will be divided among your creditors. This is your last option.
Contacting the bank
You can also request a one-time settlement if you cannot pay off the growing credit card account. In this case, the bank will ask for the principal amount or cut the due amount. Banks typically keep the requested amount below the principal amount.
You get hassle-free loans, strong credit scores, and many other advantages if you pay your credit card dues on time.
If you want an online credit card, apply at IDFC FIRST Bank. The bank offers credit cards at low-interest rates between 0.75% to 3.5% per month and are free for a lifetime. Moreover, you can earn up to 10X rewards on each of your expenses and redeem them to avail of exciting benefits.