by Venus Zoleta, on category "Credit Card"
March 4, 2018
It’s that dreaded time of the month—your credit card bill arrives, and you aren’t sure if you can pay off your total balance. You have other priorities on your budget, so missing a credit card payment becomes an irresistible option. It won’t hurt as much as losing electricity when you don’t pay your utility bills.
Yes, it’s easier to forgo your credit card payment for a month. You can still use your card anyway. But the consequences can be more serious than you imagine.
Here are five scary scenarios that will happen if you skip a credit card payment.
Think one missed payment on your credit card won’t make a dent in your budget? Think again.
When you start skipping a payment, your unpaid balance will be carried over to the next billing cycle. But that’s not all. You’ll be paying a finance charge, which is the interest (with rates ranging from 2% to 3.54%) applied to your total amount due, which includes your remaining balance plus the outstanding balance.
This compounding monthly interest will make it harder for you to fully pay your credit card bills on time. Thus, it’s easy to rack up debt with just one missed credit card payment.
Aside from the finance charge, the bank will also charge you a late payment fee. It could go as much as PHP 750 or 8% of the total amount due for each month that you pay past your due date.
Because late payment fees add up to your balance, they also accumulate interest. Thus, if you start missing a credit card payment, you’ll notice your bills piling up quickly.
To avoid late payment fees, know when your credit card payment will be posted to your account. Some payments are posted to the account only two to five days from the actual payment date. Check with your credit card provider just to be sure.
Banks require a good credit standing—which means making full and timely payments each month—so that cardholders can continue to enjoy their credit card benefits.
Skip one credit card payment even for just one day, and you’ll be saying goodbye to those points, air miles, and other rewards you’ve earned. You also won’t qualify for credit card promos.
Even if the bank still gives you rewards despite your unpaid balances, it won’t be worth it because the interest you’re paying is much higher than the rewards you’re getting.
It’s also easy to lose your card privileges if you keep on missing your monthly payments. In fact, the Bangko Sentral ng Pilipinas allows credit card providers in the Philippines to suspend or terminate a cardholder’s right to use a card in case of a delinquency. Your bank can do that automatically if you still have not paid your balance after 90 days from your original billing statement.
Unpaid credit card balances will certainly hurt your credit history. Once it goes beyond 90 days past due, you’ll have a permanent negative credit record—all lenders have access to this information.
That can be bad if you’ll apply for a personal loan or car loan in the future. Future lenders will know your history through credit checks. If they find out about your unpaid credit card debt, you’ll be considered a credit risk, making it difficult for you to get approved for a loan or a new credit card.
Dealing with one missed credit card payment is enough to stress you out—how much more if you skip it for months? You’ll worry about adjusting your expenses to set aside money for paying your debt little by little. Worse, it may lead to sleepless nights and ruined relationships, like when you try to borrow money from a friend or colleague to pay off your credit card bills.
Would you go through so much hassle when you can avoid getting trapped in credit card debt?
Ideally, your monthly balance must be paid off before the due date. This way, you can make the most out of your credit card while minimizing the cost.
Skipping a credit card payment happens for various reasons, though. Sometimes, you just forget to pay your balance by the due date. Or an emergency has kept you from paying on time. Worst, you’ve overspent on your credit card that your budget isn’t enough to make a full payment for a month.
Be one step ahead of these situations. If you’re busy or forgetful, have an automatic debit arrangement with the bank so that your payments are automated every month. Short on budget? Try to pay at least the minimum balance by the due date.
If your credit card debt has gone out of hand, contact your bank and negotiate a new repayment schedule that will work for you. Also, try to enroll in a debt restructuring program with a low monthly interest rate of 1.5% and a 10-year repayment period.