Santa Claus comes around just once a year. In the meantime, there are Credit Cards.
  • Credit Card Defaulter

    A credit card default happens when an individual fails to make any payments towards their credit card outstanding bill for a long period of time. If a customer fails to make even the minimum payment amount to the credit card company for six months in a row, he/she will be put in the defaulter list and their credit card account will be immediately deactivated. Those who use credit cards should be very careful and pay their dues responsibly to avoid being put on a credit card defaulter list.


    Consequences Of Credit Card Default

    • Customer will be blacklisted: Banks and credit card companies will blacklist people who fail to make payments towards their credit card. The default will also be reported to all other credit bureaus. This information will become accessible to all banks, lending agencies, and credit card companies.
    • Credit card will be blocked: The bank will first block the credit card of the defaulting customer in order to prevent him/her from using the card in the future. The cardholder will no longer be able to swipe the card to pay for services using the same. Therefore, until all dues are settled and the bank is convinced, the card cannot be used again.
    • Legal action can be taken: Legal action can be taken in the court of law for credit card payment default. The name of the violator will also be a part of the credit card defaulter list in India. This can be made into a civil dispute and the case can be filed in a court of law.
    • Access to credit will be harder: Since the name of the violator will be blacklisted, it will be very difficult to get loans or any type of credit in the future.
    • Recovery agents may approach the cardholder: Usually, banks tend to give customers some leverage and time to pay the bill. This can extend anywhere between 60 days to 90 days depending on bank to bank. If no payments are made even after this period, the case will be forwarded to the bank’s recovery house. Recovery agents will then approach the cardholder and ask him/her to settle the bills at the earliest.
    • High-interest rates will be charged: For those who have repeatedly missed their payment due dates, the rate of interest charged will be significantly higher. This is known as penalty charges.
    • Credit score takes a hit: The credit rating of the customer will definitely take a blow if payments are defaulted. This is because credit rating agencies regularly receive reports about credit card holders and their payment histories are carefully recorded.
    • Assets acquisition: This is the worst possible scenario and can happen only at the last stage. If the bank has access to the savings bank account or other accounts of the customer, funds from these accounts will be used towards the outstanding bills. Apart from this, some banks may also seize properties owned by the cardholder to settle the dues.

    Can A Defaulter Go To Jail For Not Paying Credit Card Bills?

    Most banks will leave legal action to the last resort. First, the credit card company will contact the cardholder and ask him/her to make payments and also give the defaulter a reasonable amount of time to at least make a minimum payment. As the last step towards the recovery of dues, credit card companies will file a civil case. Generally, criminal cases cannot be filed for civil disputes.

    For How Long Can A Cardholder Miss Credit Card Payments?

    As a general norm, it is better not to miss credit card bill payments as it will significantly affect the credit score of the individual. Banks tend to give customers a 60 day to 90 day grace period to make payments. During this period a penalty interest rate will be charged for late payment of bill.

    Even if the credit card bill is paid a day later than the actual due date, a certain amount of fee is charged for late payment in the form of interest. This interest rate varies from bank to bank and ranges anywhere from 6% to 20%.

    It is possible to negotiate with the credit card company or bank in case of a default. In some cases, the EMI towards the outstanding amount can be reduced by increasing the tenure and the interest rate.

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