Credit cards come with many benefits but all these gains can be overshadowed by a few missed payments. With your credit card, you can use it to make purchases and spend up to the credit limits you have been offered. Today, people are using these cards in areas like home improvements, travelling, purchases of groceries and other home stuffs as well as general shopping. But did you know that missing a few payments could plunge you into the most difficult financial problem you have ever encountered in your life?
There are numerous consequences of missing credit card balance payment and none of these penalties is either good. It is important that you pay credit card bills and balances in time. Even when you have money to pay your bills, you may accidentally fail to make the payment because you forget or you were too busy. This is never an excuse as to why you may make a late payment.
Paying your credit card bills must be a priority and not an option. Credit card bills can affect and taint your credit score for many years. When a person misses a payment, a late fee is placed on the account. This late payment fee becomes bad if it increases the balance of the card beyond the credit limit and this is because such as situation leads to additional fees.
Typically, the charges for late payments and over-the-balance charges will vary from one card issuer to another but generally they range between $25 and $35. If you miss payment, your interest rates could skyrocket to higher APRs. Card issuers will increase the APR due to a late payment and this can plunge you into difficulties. Whether it was caused by lack of funds or you forgot, you may end up paying 15 percent more on your initial APR.
If your APR was 16%, it means that with only one late payment, you may end up paying 31% on your credit balance. These charges continue to increase every time you make a late payment. Similarly, if you have a card with 0% APR intro rate, this privilege could be wiped out if you make a late payment. Your 0 percent APR could hike to 20.99% or higher because of that mistake.
Another impact you suffer when you make late payments is that they show up on your credit report. Usually a single late payment may not be a problem but a second or third late payment could raise a red flag. Late payments can make it more difficult for you to acquire loan facilities like mortgages, personal loans, and car loans. They also make it quite challenging to get new credit cards. Landlords also consider your credit report and may turn down your application because of the score.
If you do not make payment towards your credit card debt for several months, you risk your account being closed. This still damages your credit history and could have far reaching implications on your future borrowing ability. The more the payments you miss, the more you lower your FICO score and this means that you begin experiencing troubles with lending institutions. One of the reasons why people are going for the extremely high-interest rate payday loans is because they tainted their score with late payments and cannot now access loan facilities from banks or credit unions.
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