9 ways to use credit card properly!

Like any other type of loan, credit cards also have defaulters. And as in any other loan, defaulters face a penalty. If a customer fails to make even the minimum payment amount to the credit card company for six months in a row, he/she will be put on the defaulter list and the credit card account will be immediately deactivated.

Here are the nine consequences that one might face on regular non-payment of credit card dues.

Penal interest

The penal interest that the bank charges for non-payment of dues even after the 60-90-day time period can be high. It is usually between 6% and 20% which keeps pushing the dues higher and higher quickly.

This interest will be charged even if there is a delay by one day after this time window.

On blacklist

Banks and credit card companies would blacklist the person if he/she fails to make payments regularly. The default will also be reported to all other credit bureaus.

This information will be accessible to all banks, lending agencies, and credit card companies, affecting all future credit requirements of the individual.

Credit blocked

Banks will first block the credit card of the defaulting customer in order to prevent him/her from using the card further. The cardholder will no longer be able to swipe the card to pay for services.

He/she can only get his card and services restored by clearing all the dues.

Late fees

For a delay in the credit card payment, the card holder will be charged a late fee. The next billing statement of the person will also include a fee for late or missed payments.

The late fees charged will depend on the credit card late fees policy or whether it has happened for the first time in the past six months. Also, if the payment is late every month, the credit card holder will be charged a late fee payment or less than the minimum payment.

Legal action

Legal action can be taken in a court of law for credit card payment defaults. The name of the violator will also be a part of the credit card defaulter list in the country.

This can be a civil dispute and the case can be filed in a court of law.

Recovery agents

Usually, banks tend to grant customers some time to pay bills. This can extend to any period between 60 days and 90 days and varies from bank to bank.

If payments are not made even after this period, the case will be forwarded to the bank’s recovery house. Recovery agents will then approach the cardholder and ask him/her to settle the bills at the earliest.

Credit score

The credit rating of the customers will definitely dip if there are payment defaults. This is because credit rating agencies regularly receive reports about credit card holders and their payment histories.

Your credit score drops after a late payment and it will have a negative impact for all your future transaction related to loans and other.

Added to the credit report

Late payment also affects your credit report. If your payment is more than 30 days late, an entry is added in the credit report. This entry can stay for 7 years. It will have a negative impact on your credit score/report for the next 7 years.

Behind the bars?

Most banks generally give the defaulter a reasonable amount of time to at least make a minimum payment. As the last step towards the recovery of dues, credit card companies will file a civil case.

Generally, criminal cases cannot be filed for civil disputes and hence one cannot be sent to jail if he/she fails to pay the credit card dues in time.