Credit Card Late Payment Avoid Tips: When credit card bill is late, banks not only charge late fee, but also charge quite heavy interest on the entire outstanding. Know smart ways to avoid this in this article…
Credit Card Late Payment Tricks: Credit card is included in everyone’s lifestyle today. Most of the people use it for every major shopping, but if the bill is not paid on time and the due date for paying the bill passes, the bank starts charging late fees. Many people think that if there is a delay of just 1-2 days, what difference will it make? But this is where the damage starts. Late payment is not just a charge on a credit card. Many other hidden disadvantages are also added to this. In this article, know how late fees are charged, what is the interest trap of banks and what are the smart ways to avoid it…
How are late fees charged on credit cards?
1. Late fees
If the bill is not paid on the due date, banks immediately impose late fees. Most banks charge Rs 500-1500, depending on your outstanding amount. However, RBI has simplified some rules regarding late fee charges, thereby increasing transparency. Banks will now give clear information to the customer before charging late fees and any change in fees will have to be informed a month in advance.
2. The entire outstanding goes towards interest
This is considered to be the biggest shock for credit card users. If you are late, your entire dues go to interest at 36-49% per annum. Meaning, 40% annual interest can be charged on a bill of Rs 10,000 i.e. a loss of about Rs 11-12 every day.
3. Grace period ends
The interest-free period you receive ends on your next purchase. Now interest starts accruing on every purchase made through the card from the same day. Reserve Bank of India will also give a grace period of at least 3 days to the card holders after payment, within which late fee will not be charged on payment.
4. Credit Score Down
Once a late report is made, your CIBIL score may drop by 50-100 points. This may affect your future loan, home loan, car loan and limit increase.
How much loss can be caused by credit card late payment?
For example, suppose if your bill is Rs 15,000 and you do not pay it on time, then late fees of Rs 1000, finance charges of Rs 450-600 per month and GST may be imposed. In this way, the total loss in a month can be up to Rs 1500-1800. If there is a delay of 3-4 months then the loss can be more than Rs 5,000.
What to do if you can’t pay your credit card bill?
1. Pay the minimum payment immediately
This method is not considered good, but a lot of charges can be avoided. By paying the minimum payment, there will be no late fee, but your interest will continue and also keep in mind that there will be no reduction in the full payment. The only benefit of this will be that the CIBIL score will be saved from falling.
2. Set Due Date Reminder
Set an auto reminder in Google Calendar, phone alarm or bank app. For most people, late payment happens simply due to forgetfulness. With this you can avoid a lot of charges and also save money.
3. Activate auto-debit
Once auto-debit is set up, the payment will be deducted automatically every month. If there is a fear of overdraft, you can choose the auto-debit option of ‘Minimum Amount Due’ only.
4. Break bill payment i.e. smart split method
If you are not able to pay your entire amount then you can pay it in two parts. The half can be filled a few days in advance and the base can be filled after 5-7 days. This will reduce late fees and interest rates will also reduce.
5. Choose EMI conversion
If your bill is high then you can convert it into EMI. This will reduce interest and there will be no problem of late payment.
6. Redeem Reward Points or Cashback
Many cards have reward points ranging from Rs 500-2000. Use them for bill payment. This can provide a lot of benefit.
Disclaimer: The information given in this article is for general financial education only. This is not financial, credit or loan advice of any kind. Before taking credit card related decisions like late payment, interest, charges or EMI conversion, please consult your bank, card issuer or financial advisor. Every bank has different policies and charges may depend on your card type, usage and payment history. Therefore, it is important to check complete information before taking any step.
Read this also- How to make 5 lakhs in 25k salary? No one will tell you these tricks!
Read this also-How to repay home loan quickly? EMI reduced by 5 years with just one trick!