Misuse of credit cards by non-payment or late payment of dues can have negative consequences on the credit worthiness of an individual. Banks refer to credit worthiness of an individual when they offer a loan to their customers and delayed or non-payment of dues negatively impacts credit score which can lead to refusal of loans for future purposes, says financial experts.
Banks and companies offering credit cards give its customers an option to pay minimum amount due if they cannot pay the total amount due.
In case if a person has total amount due of Rs. 50,000, he/she can pay minimum amount due say for example Rs. 2,500. After paying minimum amount due, although the total amount due will come down to Rs. 47,500 but the interest will be charged on total amount due that is Rs. 50,000. Analysts say paying minimum amount due regularly can lead to a person falling in a debt trap.
While lenders may allow you to pay the minimum amount due on your credit card, all outstanding amounts are featured in the accounts Information section (under Payment status and Payment History) of your CIBIL Report – and this may impact your CIBIL Score and your future access to credit., Sujata Ahlawat, vice-president and head of direct to consumer interactive at TransUnion CIBIL said.
“Always ensure you pay the full credit card amount on time, every time, and definitely before the payment due date-after all there is a 45-day repayment window that you may leverage. Regular and timely payments can help build a positive credit footprint, and, in turn, better access to credit when the need arises,” .
In case an individual has maxed out or used his/her entire credit limit, then in that case individuals can opt for personal loan and pay the full amount back. Instead of exhausting the entire credit limit frequently or if you have multiple credit cards with payments pending, you may consider taking a single personal loan (at a lower rate of interest) or even a loan against gold, and pay off all the outstanding amounts, says an expert.
“Consumers should ensure they do not exceed more than 30 per cent of their credit utilization limit on a monthly basis,”. Expert emphasized.
Non-payment or delayed payments can adversely affect your CIBIL Score, and a low CIBIL score educes your chances of access to credit.