What will Happen if You Become a Credit Card Defaulter?

What Happens If You Default on Your Credit Card?

Even if you had no intention of doing so, any of the aforementioned causes could lead to you experiencing the repercussions of credit card default.

As a result, you must be aware of the repercussions of being a credit card defaulter in order to remain on top of your bills well in advance-

Having a negative impact on your credit score– Late or missed credit card payments result in a lower credit score, negating the credit card's primary benefit. Your credit score can be enhanced by making good use of your credit card and paying your payments on time. A solid credit score is required to ensure that you will be eligible for larger loans in the future. Your financial health will be harmed if you do not pay your bills on time.

Credit Card Account Blocked– If you do not pay your credit card payments for a period of six months, you will be considered a credit card defaulter. You will be placed on the bank's blacklist, which will result in the cancellation of your credit card account.

Legal action– If you don't pay your credit card bills for an extended period of time, you may be considered a fraud. As a result, banks may pursue legal action against you, making it impossible for you to obtain loans from anyone in the future.

High interest rates– Credit card firms charge interest rates as high as 30 percent of the credit card late balance if bills are not paid within 60 days. This high interest rate will also be applied to any new purchases made with your credit card. If you keep doing this, the interest on your credit card account will soon be greater than the actual credit card charge!

Interest on outstanding balances– Despite popular belief, you are not solely responsible for paying the minimum amount due on your credit card account before the due date. It is a common misconception that paying only the minimum credit card debt will protect you from interest charges. This is not the case. In reality, you will begin paying interest on the outstanding balance as soon as your payment is due. As a result, it is strongly recommended that you pay off your credit card balance in full.

Banks have the right to access funds in your savings or other accounts to settle outstanding amounts if you don't pay your bills on time. In the worst-case scenario, banks may seize your property or other assets to pay off your debts.

How Can You Avoid Defaulting on Your Credit Card?

Credit card payments can have a significant impact on your financial health, therefore they must be treated with caution. The following are a few basic financial habits that you should incorporate into your daily routine to avoid late credit card payments and avoid the consequences of credit card default.

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• On your credit card's mobile app/online portal, enrol in the auto-pay option.

• Set up recurring reminders for your deadlines.

• Do not put off paying your past-due credit card until the last minute.

• If you're absolutely strapped for cash, pay at least the minimal amount owing by the deadline. The amount can be paid off throughout the interest-free term.

• If you've reached a point when paying your credit card bills seems impossible, you might consider a personal loan because these loans offer lower interest rates.

• You can ask your bank to convert your outstanding debt into simple, manageable EMIs that you can pay over a certain length of time.

• You can also move your credit card debt to another bank account and pay it off over time with regular EMIs.

• If your financial situation has become untenable, you may consider filing for bankruptcy, which will allow you to restructure your debt and make it more manageable.