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Supreme Court Judgment on Credit Card Defaulters

Wondering the Consequences of Being a Credit Card Defaulter? Find out here!

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Wondering the Consequences of Being a Credit Card Defaulter? Find out here!

People using credit cards can make transactions on credit, which means they can spend now and pay later. For the time being, banks firms pay for your purchases and give you an option to refund the spent amount later. But if you do not repay the spent amount in the given timeline, you will become a credit card defaulter.

Who is known as a Credit Card defaulter?

When you fail to make any payments on your outstanding credit card debt for an extended period, a credit card default occurs. You may be placed on the defaulter list, and your credit card account will be canceled immediately if you fail to make the minimum payment on your credit card for more than six months in a row.

Reasons One Could be a Credit Card Defaulter

Here is the list of reasons that can make you a credit card defaulter. 

  • Excessive Spending

There may be times when you exceed your credit limit and find it difficult to repay the debt. Thus, it is recommended that you should not spend more than 60% of your credit limit so that you may be able to return the amount later without any problem. 

  • Delaying Tactics 

Many people put off paying their credit card debt until the last minute. While it doesn't matter if you pay it before the due date, it's always a good practice to pay your bills ahead of time. With Finserv MARKETS, you may settle your bills in a few minutes, which eliminates the risk of missing a bill payment along with the possibility of incurring high-interest charges for late credit card payments.

  • Disruptions in the Mail

If you haven't chosen to receive your bills electronically, your bank will send them to your home address by mail. In such instances, there is a good probability that your invoices will be missing or will arrive late. This could eventually result in a credit card payment default. Hence,  it's a good idea to switch on your internet notifications and check your email regularly for any credit card overdue.

  • Ignored Due Date

You may forget about your due date and fail to settle your credit card payments at times. You can use the Finserv MARKETS app to pay your bills because it always sends reminders to its customers before the payment due date.  

Consequences of Being a Credit Card Defaulter

Here is the list of repercussions of credit card payment default. 

  • Lawful Punishments

Failure to pay your credit card debt over an extended period indicates that you are committing fraud. As an outcome, banks may pursue legal action against you, making it impossible for you to obtain loans from anyone in the future.

  • Suspended Credit Card Account 

You will be considered a credit card defaulter if you do not pay your credit card bills for six months. Your credit card will be blocked by the bank, preventing any further transactions with it.

  • Detrimental Effect on Credit Score

Default on credit card debt can lower your credit score. If you miss a payment, it will have an impact on your credit score. This is because credit rating firms receive reports on your payment history regularly. Your financial health will be harmed if you do not pay your bills on time.

  • High-Interest Rates

When credit card bills are not paid for more than 60 days, credit card firms charge interest rates as high as 30% of the amount owed. This high-interest rate will also be applied to any new purchases made with your credit card. 

  • Asset Possession 

Banks now can use funds available in your savings or other accounts to clear outstanding balances if you do not settle your default on credit card debt. Banks may also seize your property or other assets to pay off your debts in the worst-case scenario.

Tips & Insights on How to Not be a Defaulter

Below are some tips that can save you from being a credit card defaulter. 

  • On your credit card's mobile app/online portal, enrol in the auto-pay option.

  • Set up recurring reminders for your payment due date. 

  • Do not use delaying tactics to pay your debt value. 

  • Pay at least the minimum amount owing by the deadline. 

  • If paying your credit card bills seems impossible, you might consider a personal loan because these loans offer lower interest rates.

  • You can convert your outstanding debt into simple, manageable Credit Card EMIs with the help of your bank. 

  • If your financial situation has become untenable, you may consider filing for bankruptcy, which will allow you to restructure your debt and make it more manageable.

Supreme Court Judgment on Credit Card Defaulters

The SC has established some criteria that should not be broken when requesting credit card payments from the cardholder. 

  • In the event of an EMI default, the loan becomes an NPA of the bank. In that situation, the loan recovery department can begin contacting the credit card defaulter and request to settle the loan dues at the earliest. 

  • The debt collectors are not allowed to harass the cardholder or call them at odd hours demanding credit card debt repayment.

  • In the situation of a violation, the credit card holder may file a complaint with the bank.

  • If you make a complaint against a recovery agency, the bank is required to conduct an investigation. 

  • You can tell the agent not to contact you or make visits for a few days if there is a death in your family or any other such event.

Bottomline

Settling your credit card bill on time can provide you numerous benefits such as a good credit score, hassle-free loans, and many more. With its smooth and quick services, you may avoid late credit card payments by using the Finserv MARKETS app.