What Happens If You Don't Pay Your Credit Card Bill in Full?

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. After all, it won’t hurt as much as losing electricity when you don’t pay your utility bills.

Or is it? Yes, it’s easier to forgo your credit card bill for a month. You can still use your card anyway. But the consequences can be more serious than you imagine. Here are five possible scenarios that can happen if you skip a credit card payment.

What happens if I miss a credit card payment?

It’s a One-Way Ticket to Debt

credit card bill - credit card debt

Think one missed credit card payment won’t make a dent on your budget? Think again.

When you start skipping a payment, your unpaid credit card bill will be carried over to the next billing cycle. But that’s not all. You’ll be paying a finance charge^[1], 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. Even if you just forgot to pay your credit card bill, you will still be charged 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.

You’ll Lose Your Credit Card Perks

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 might be saying goodbye to your 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.

Your Card May Be Cancelled

credit card bill - cancel credit card

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^[2] in case of a delinquency. Your bank can do that automatically if you have not paid your balance after 90 days from your original billing statement.

You’ll Ruin Your Credit History

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 won't cut it if you're planning to apply for a personal loan or car loan in the future. Potential lenders will know your history through credit reports from the Credit Information Corporation (CIC) and other credit bureaus in the Philippines. 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.

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It Will Lead to Financial Stress

Dealing with one missed credit card payment is enough to stress you out^[3]—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.

Why Should I Pay My Credit Card Bill in Full?

credit card bill - pay in full

"What if I only pay the minimum amount due?" you might ask. Some cardholders pay only the minimum balance because it's easier on the budget. Banks in the Philippines require a monthly credit card payment of at least a small percentage, ranging from 3% to 10%, of the total amount due.

In theory, paying the minimum on your credit card bill is better than skipping a payment and incurring a late payment fee. But it will actually cost you more over time. Here are the advantages you'll enjoy if you always pay your credit card in full.

Avoid Interest on Your Credit Card Bill

When you pay just the minimum balance on your bill, you leave a balance that's carried over to the next credit card billing cycle. In addition, the bank will charge you high interest on the overdue amount plus the outstanding balance.

Even if you're paying the minimum amount, your credit card balance still increases from month to month. This can make it harder for you to pay off your total balance. You'll end up paying for your credit card bill monthly without cutting your balance down to zero.

So always make your full credit card payment by the due date and you'll never have to pay any interest. A zero finance charge on each credit card billing statement doesn't just look good on paper—it also means no debt to deal with.

Improve Your Credit Score

Two important factors that affect your credit score are your payment history and credit utilization ratio^[4],the percentage of the credit you're using.

The credit payment history includes not just how timely you pay your credit card but also how much you pay. To get a good credit score, build a strong payment history by paying your monthly credit card bill in full.

Another way to boost your credit score is to avoid carrying a high balance on your credit card. Keep it well below your credit limit to reduce your credit utilization ratio and increase your credit score. Consistently paying off your credit card bill maintains a zero balance on your account.

Be More Financially Disciplined

If you make full credit card payment a priority, you're committing to set aside a portion of your monthly budget for it. You'll aim to keep your balance low, making it easier for you to pay your bill in full every month. As a result, you'll be more frugal with your credit card spending to keep your balance within your target limit. This trains you to be more responsible in using your credit card.

What if I Really Can't Pay for My Credit Card Bill?

credit card bill - can't pay for credit card bill

But sometimes, certain financial emergencies can leave you incapable of paying your credit card bill. Does that mean it's over for you and your card? Not quite. Here are some ways you can deal with your unpaid credit card balance.

Pay the minimum amount due

The band-aid fix is to pay the minimum amount due. But what happens if you only pay the minimum payment on your credit card? Usually, it amounts to 1% to 5% of your total balance. While it guarantees you another month of credit card use, it's best to not make this a habit to avoid incurring interest to your remaining unpaid balance.

You’ll end up paying more than you need if you only pay the minimum balance. Ideally, you need to go beyond the minimum—shave off at least a third of your remaining balance to minimize the damage.

Apply for a Balance Transfer

Another option is to apply for a balance transfer. This will consolidate your debt to a new credit card with lower interest rates. Your new issuer will have to agree to pay the debt from the original lender and in turn, you’ll pay them back at a lower interest rate. This might allow for more breathing room.

Terms for balance transfers can range from 3 to 24 months with interest rates ranging from 0% to 2.15%. Bear in mind that you’ll need to have a good standing with your new credit card provider in order for them to agree to these terms.

Restructuring Programs

A last-ditch option is to have your account restructured and provide the bank with evidence that you can pay back your debt after a while. Have the courage to negotiate with your credit card provider so you can have flexible payment terms. Banks are willing to help their clients restructure repayment terms to avoid default listing.

Final Thoughts

It takes a lot of commitment and willpower to make a full credit card bill payment every month. It may sound difficult, but consider the benefits you'll gain from it. With great credit card comes great responsibility... to pay back exactly what you owe.

But sometimes, financial emergencies can keep you from paying your credit card balance in full. In that case, try to pay as much as you can to keep your balance low. And when you've recovered, get back to consistently making full payments.