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Tata Capital > Blog > Personal Use Loan > Things You Should Know About Late Credit Card Payment

Personal Use Loan

Things You Should Know About Late Credit Card Payment

Things You Should Know About Late Credit Card Payment

Introduction

Managing finances can be challenging, and with the convenience of credit cards, it is easier than ever to make purchases and pay bills. However, keeping track of credit card payments is crucial to maintaining a healthy credit score and avoiding additional fees.

This article will discuss what happens when we miss a credit card payment and the potential consequences of late credit card payments.

What happens if we miss a credit card payment?

When we receive our credit card bill, it typically comes with a specified due date. If we fail to make a credit card payment by this date, we are considered to have made a late payment. Consequences of a late credit card payment include late payment fees, increased interest rates, and negative impacts on our credit score.

Let's delve deeper into these consequences with a hypothetical example. Suppose John has a credit card with an Rs. 200,000 balance and a 30% APR (annual percentage rate). His minimum monthly payment is Rs. 5,000, and the payment due date is the 15th of every month.

Late Payment Fee Credit Card: If John misses the due date for his credit card bill, the card issuer may charge a late payment fee. This fee can vary depending on the card issuer and the terms of his agreement, but it is typically a set amount, such as Rs. 500 or Rs. 1,000, which is added to his outstanding balance. So, if John misses his payment and the credit card late fee is Rs. 1,000, his new balance would be Rs. 201,000.

Increased Interest Rates: Missing a credit card payment can also result in a higher interest rate on the credit card balance. John's card issuer might impose a penalty APR, which can be significantly higher than the regular interest rate. For example, if the penalty APR is 30%, the interest charged on John's balance would increase, making it more expensive to carry a balance on his credit card.

Credit Score Impact: Late credit card payments can hurt your credit scores. In John's case, his late payment is reported to the credit bureaus, which lowers his credit score. Payment history is a significant factor in determining one's credit score, and late payments can drop several points. Furthermore, a late payment can remain on the credit report for up to seven years, affecting John's ability to qualify for loans, mortgages, and other financial products.

Loss of Promotional Benefits: Some credit card issuers offer promotional benefits, such as introductory interest rates or reward bonuses, which may be revoked if we fail to make timely payments. If John had been taking advantage of a 0% APR on balance transfers for 12 months, missing his payment could result in losing that promotional rate, causing his interest rate to revert to the standard rate or even the penalty APR.

Conclusion

In conclusion, using credit cards responsibly, including Tata Capital credit cards, can positively impact your financial health. However, it is essential to prioritize timely credit card payments to avoid the negative consequences of late payments.

Missing a credit card payment can result in late payment fees, increased interest rates, damage to credit score, and the loss of promotional benefits. To maintain a healthy credit score and minimize the financial impact of credit card usage, always strive to make credit card payments on time and stay aware of payment due dates.

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