Credit Card Payment: If you use a credit card, this information matters. According to the RBI, the number of active credit card users in the country has crossed 120 million, and monthly card spending has surpassed ₹2.02 crore; these figures highlight the massive scale of credit card usage in the country. People use credit cards for everything from shopping and paying via EMI to watching movies and booking flights. This raises a question: what happens when someone fails to pay their credit card bill? Let’s explore this in detail.
What happens if you don’t pay your credit card bill?
Numerous regulations govern credit card use in the country. Whether it is the RBI or the issuing bank/institution, the rules are communicated to you upfront. Not paying your credit card bill can lead to significant consequences. The repercussions can be severe enough to result in your card being blocked or even receiving a legal notice. Let’s look into this further.
Heavy interest charges
If you fail to pay your credit card bill, you may be liable for steep interest charges. Banks provide a specific due date for payment. If you miss this date, RBI regulations allow for a three-day grace period. However, if you miss these deadlines and fail to pay, the bank or issuing institution can charge monthly interest ranging from 3% to 4% on the outstanding amount. Annually, this interest rate can range from 30% to 45%, making the cost of settling the bill extremely high.
Impact on CIBIL score
Failing to pay your credit card bill on time can negatively affect your CIBIL score. Consequently, if you attempt to finance a purchase or apply for a loan, a poor credit score can create significant obstacles. In such a scenario, your loan application might get rejected. CIBIL scores typically range from 300 to 900. A score of 750 or higher is considered good, whereas a score below 750 can make it difficult to secure a loan.
Difficulty in Obtaining a Credit Card
Missing payments can also make it harder to get another credit card. Banks check your CIBIL score before issuing a card, and they can also access details regarding your credit card history. Consequently, you might be denied a second credit card. Even if you do manage to get one, the credit limit offered may be quite low.
Legal Notice
If you fail to pay your credit card bills and the default persists, you will start receiving recovery calls from agents, which can be distressing. Initially, you will be asked to clear the outstanding amount along with the accrued interest; however, if you still fail to pay, the bank will initiate formal action. In that case, the bank may even send you a legal notice.