Regularly failing to pay your credit card bills can lead to financial problems that can get harder to handle. These difficulties could have an impact on your credit score, debt load, and other aspects of your financial life. Here are the potential consequences of consistently missing payments.
1. Penalty Fees and Interest Accumulation
If you miss a credit card payment, you'll be charged penalty fees, and your interest rates will go up, causing your balance to increase. Over time, these extra charges can cause your debt to grow rapidly, and the longer you delay paying, the more you’ll owe. This can make it even harder to pay off your balance.
2. Damage to Your Credit Score
Your credit score declines when your bank notifies credit bureaus of past-due payments. If your score is lower, it could be harder to get credit cards, loans or even rent an apartment. Your credit may be negatively impacted for years, making financial situation correction more costly and challenging.
3. Collection Efforts by Agencies
The bank might turn your account over to a collection agency if you haven't made any payments yet. You may receive a deluge of calls, emails, and reminders from these tenacious agencies. These actions can also add to your stress, as they are reported to credit bureaus, making your credit situation even worse.
4. Limited Options for Debt Settlement
If the bank is attempting to recover the debt, it may offer options such as dividing your balance into smaller EMIs or settling the debt for a lump sum. While these may appear to be viable options, they frequently include additional fees, higher interest rates and longer repayment periods. However, the damage will continue to reflect on your credit report.
5. Legal Action for Non-Payment
When all other attempts to recover the debt have failed, the bank may pursue legal action. This could include launching a civil case to retrieve the remaining balance. If a cheque used for repayment bounces, the bank may take action under the Negotiable Instruments Act of 1881, which deals with dishonored cheques. In circumstances of purposeful nonpayment or fraud, the bank may launch criminal actions, which can result in fines or imprisonment.
How to Prevent Missed Payment Consequences?
To prevent the consequences of missing payments, set up recurring payments or reminders to keep you on track. Keep your expenditures under control and stay inside your credit limit. If you're having trouble, contact your credit card issuer to discuss payment options. Staying on top of your payments will help you safeguard your credit score and avoid future financial problems.
