Payment gateways in India have been advancing and elevating at a swift pace for many years now. Today, we get multiple options to complete a payment transaction, but what has remained the favourite of all is our beloved Credit Card.
Whenever you place an order for your favourite dress online or book a fancy meal at a starred restaurant, you would often opt for a credit card as your mode of payment, right?
Though a credit card comes with its share of boons and banes, it may become a stumbling block in case you miss any of your credit card payments frequently.
Hence, we have jotted this blog to acquaint you with the possible reasons that can make you a credit card defaulter, along with the ways to avoid the same.
Let’s first start by understanding what a credit card default exactly means before we delve further.
You might assume that a credit card default means missing your credit card payments. Well, this is a half-baked truth.
In reality, missing out on your credit card payments once or even twice is not considered a default, but it is deemed one when you miss out on paying the Minimum Amount Due (MAD) for several consecutive months. Though a credit card issuer makes sure to notify the user to pay off after 6 consecutive missed payments, it is the duty of the cardholder to do the needful.
In short, if you miss paying credit card bills on time, you may be charged with hefty interest charges and end you up becoming a defaulter.
While getting a credit card issued under your name, you are liable to sign off multiple terms and conditions. If you fail to adhere to any of those terms and conditions, you may fall under the bracket of being called a defaulter.
Here are some of the major reasons why you may happen to become a credit card defaulter-
The credit card issuer sends credit card statements monthly. You may miss out on reading the correct due date or are in the notion of a false one.
If any such instance happens, your confusion may cost you to become a defaulter.
Exceeding your credit card limit is a big no-no. But if you happen to do so and fail to repay the amount, you may become a defaulter in no time.
Procrastinating is bad, really bad when it comes to delaying your credit card payments. Not paying off the levied payments can cost you a fortune within seconds.
If you wait till the very last moment to make your credit card payments, you are ultimately putting your wallet at risk of fat charges.
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Listed down are some of the primary yet significant consequences of defaulting on your credit card payments-
A credit card issuer may term you a defaulter if you do not pay your credit card bills for a prolonged period. You will likely incur a legal action filed under your name and termed fraud. You definitely wouldn’t like being called so, right?
So, ensure to pay your credit card bills on time to avoid additional interest charges and any legal action from the governing body.
Your credit score is the first thing that will likely be affected by your credit card defaults.
Missed or late payments lower your credit score and diminish your prospective credit requirements as well.
Therefore, to maintain your credit score and credibility, it is important to pay your credit bills within the said due dates.
Everyone is terrified of high-interest rates. You must be, too, right?
Well, you may be levied with high-interest rates in case you do not pay your credit card bills timely. The interest rates may be as high as 30-35%, scary no?
Thus, to avoid getting caught in the pail of high-interest rates, ensure to pay your bills on time.
A primary consequence of credit card delinquency ends up in a blocked account. If you consistently fail to pay your credit card bills, you will be deemed a fraud, resulting in a blocked credit card account.
To avoid this, we suggest you pay your credit card bills well ahead of time. A blocked credit card not only hampers your credit score but your urgent credit needs as well.
Getting your assets acquired by a bank in case of credit card defaults sounds frightening, true that?
Well, yes, banks can seize your savings accounts to clear your outstanding balances if you fail to settle your credit card defaults within the given time. In some instances, the banks may even seize your property, assets, etc., to pay off your defaults.
Hence, to avoid such an unpleasant situation, it is better for you to make your credit card payments on time!
As we said above, you may be considered fraud if you consistently fail to pay your credit card bills.
Here is how you can not be a defaulter-
Just imagine this hypothetical scenario. You have just received a legal notice from your credit card issuer saying you have been called off as a Default, asking you to pay a humongous interest as a charge; otherwise, your assets would be seized.
What would you do? Panic immediately, right?
The scenario is certainly frightening. Therefore, to avoid such a money-turmoiling mess, and being on the receiving end of getting some punishment for a credit card default, make sure to take the necessary steps to pay your credit card bill payments timely.
Being free of such default charges can help you boost your credit score, your probable loan requirements, and your credibility too.
Hence, take help from the above-suggested ways and avoid becoming a credit card default.
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Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.