The Aftermath of Skipping Your Credit Card Minimum Amount Payment
Updated: Apr 29
Credit cards are helping hands for a seamless walk-through during your financial needs. When you receive a credit card bill, you can pay the minimum amount due and the total outstanding amount. The minimum amount due refers to the small amount of the total outstanding bill you must repay the bank if you cannot repay the entire amount. However, missing the minimum amount due on credit card can lead to some negative consequences.
What Happens If You Have a Minimum Amount Due on Your Credit Card?
According to the RBI guidelines, you receive a 7-day notice period (additional grace period) with no late payment charges after the due date. This notice is issued to report you to the credit bureaus as a defaulter, ensuring you clear the dues within the period. However, if you still do not pay the minimum amount due in credit card, the following consequences result.
Late payment fee
Banks charge a late fee if you make the minimum payment after the due date. This fee varies across the bank and the severity of your case. These fees can increase your outstanding balance, increasing your overall cost.
Overburdening interest rates
The interest rate on your outstanding bill grows if you neglect to pay the minimum amount by the payment due date. In addition, the interest rate on regular purchases or cash withdrawals can also rise upon constant defaulting of the bill payment.
Lowered credit limit
Defaults in the minimum bill payments can cause your credit limit to decline. This restricts your spending capacity in future. As a result, your credit score becomes poor, and you lose creditworthiness in the eyes of your bank. This is why getting another loan or other forms of credit can be difficult in the future.
Loss of interest-free credit period perks
If you skip your credit card minimum amount payment, you may lose the interest-free credit period perks with your card. These perks allow you to make purchases and pay off your balance without incurring any interest charges if you pay your balance in full by the due date each month. The bank can withdraw this advantage upon missing dues, and interest is charged for transactions in the upcoming billing cycle.
Steady rise of minimum amount
Incomplete dues can lead to a monthly rise in your minimum amount, which can add up quickly with interest charges and late fees. If you still do not pay the minimum amount due, your bank can report you as a defaulter, further damaging your credit score. They may try to recover the debt through frequent phone calls, SMSs, and emails. If the case is severe, Loan Recovery Agents (LRAs) may visit you or file a police complaint or send a legal notice. Some banks may offer a one-time settlement to clear the debt, impacting your credit score.
If you cannot pay even after six months, your online credit card account may be declared a Non-Performing Asset (NPA), meaning it is a loss for the bank. In addition, they may sell your debt to a debt collection agency or file a lawsuit to recover the amount owed, which can lead to a further drop in your credit score and affect your credit card eligibility to avail of a card in the future.
Can You Recover from The Consequences of Missing Amount Due in Credit Card Payment?
There are consequences to missing a minimum amount due in credit card, but you can reduce the long-term damage by taking action. Follow these five tips to deal with a missed payment.
Make the payment as soon as possible: The first step is to make the missed payment as soon as possible to avoid further interest charges and late fees.
Contact your bank: If you cannot pay in full, consider contacting your bank to explore your options. They may be able to offer a payment plan or reduce your interest rate to help you manage your debt.
Monitor your credit report: Keep an eye on your credit report to ensure the missed payment hasn't hurt your credit score. If you notice any errors, dispute them with the credit bureaus.
Stay on top of your payments: In the future, stay on top of your credit card payments to avoid any future missed payments. Consider setting up reminders or alerts to help you remember to make your payments on time.
Given the potential implications of missing a credit card payment, it's critical to act if you haven't already. This may entail paying the overdue money as quickly as possible to prevent additional interest and late penalties. In addition, you may safeguard your credit score and avert more serious penalties by acting quickly. Make sure to repay your overdue credit card bill to avoid any potential negative outcomes.