At times, when you are short of cash or other payments to make, you might be tempted to delay your credit card payment. Do you know how important it is for you to make credit card payments on time? Are you aware of the consequences? There are people who are ready to pay late fees or even penalty charges. Are you one of them? If you are, in that case, you need to be aware of certain things which might encourage you to make payments on time. What if I told you that delaying your credit card payment can damage your credit score, big time! Besides, there are various other factors which you need to take into consideration
In the following section of this article, you will be offered a brief insight, as to why it is important to make credit card payments on time
Why You Should NeverDelay Your Credit Card Payments
Here are some of the reasons that would prompt you to make the payments on time. Some of them might appear to be negligible; however, they can have a serious impact on your overall financial well being. Here are a couple of reasons that might convince you:
- Say No to the Collection Agencies: There are many debt collection agencies operating in the market whose main job is to push those who fail to make timely payment. Even if you have a very small amount that has been kept unpaid for many months, can be handed over to the collection agencies. The moment your account is being handled by the collection agencies, your option of making minimum monthly payments is gone! The collection agency is likely to demand the full amount and even at times some additional charges as permitted by the law. They will keep on disturbing you as long as you don’t pay them. This can be really damaging for your reputation. Remember, their job is to collect the money from you. Hence, they won’t hesitate to harass you if required.
- Lower Interest Rate: If you are late with your credit card bill payment, in that case, it can affect the low-interest rate that you have been enjoying. The credit card companies have permission to increase the rate of interest if you are late with your payment for more than 60 days. There are some companies who charge a staggering rate of penalty interest and can be as high as 30%
- Late Fees: Companies can charge late fees if you are late in making payment for even an hour past the due date! Not possible? Well, there have been instances. Besides, why would you want to pay late fees in the first place? It can amount to something between $15 and $40. That’s a substantial amount.There is one more thing that needs to be mentioned, your late fee amount might increase if you fail to pay consistently for 6 months. Therefore, it is absolutely necessary for you to make sure that you made your credit card payments on time. It will help you save a lot of money
- Improve the Credit Score: As far as your credit score is concerned, nearly 35% of it is being determined by the fact whether you have made timely payment of your credit card or not. If you make your credit card bill paymenton a timely basis, every month, in that case, your credit score would shoot up. On the other hand, if you are a defaulter on a consistent basis, in that case, your credit score might get affected big time
- Low Insurance Rates: It is your credit score that is used by the insurance companies for the purpose of determining the rate of insurance. If you are late with your credit card payment on a regular basis, in that case, it will affect your credit score, as a matter of fact,will lower the score. This will result in an increase in the rate of insurance when it is time to renew it. Making credit card payments on time makes sure that the lowest rate of insurance is being maintained and it also helps to save a lot of money.
- Lowers Your Monthly Payment: If you miss your credit card payment, in that case, your next month’s bill will be more than double. Wondering why more than double? Well, you probably didn’t take the late fees and penalty charges into consideration. If you think that you skipping the payment for a month would give you some relief, then you are mistaken. The amount will keep on mounting up and there will be a time when it will go beyond your control. Therefore, it is absolutely essential to make sure that the credit card payments are made on time
- Good Standing: If you keep on missing your credit payment on a regular basis, in that case, the companies do have the right close your card. Your card will be deactivated, even if you have a sufficient amount of credit limit available on it. Unless you clear your previous dues, you won’t be able to use your card. On the other hand, if you make your payment on time and have a track record of making prompt payment, in that case, the company could and generally does, increase the credit limit on the card. It helps to keep your account in good standing
These are some of the reasons as to why it is important to make credit card payments on time. No matter what, you need to make sure that you don’t skip a single payment. As mentioned, you might feel that skipping a payment for a month would give you relief; however, it is temporary, it is going to hit you back quite hard the very next month. Besides, good portions of your credit limit remain used up if you don’t clear your previous dues. Therefore, make it a point to make credit card payments on time
There is one more important factor which is related to making a prompt credit card payment. It is your credit score. You need to remember, that your payment pattern plays a very important role when it comes to determining your credit score. Therefore, in order to make sure that you have a good score and it keeps on rising, you need to make the payments on time and need to maintain consistency.
Are you not in a position to pay a considerable amount of money at the end of every month? In that case, you need to make sure that you use your card in a judicial manner.