Late credit card payment: Watch out! You can lose much more than late payment fee

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Updated: Jun 23, 2020 12:28 PM

Finance Charges are payable at the monthly interest rate on all transactions including unpaid EMI installments from the date of transaction, till they are paid back in full.

 credit card charges after due date, credit card payment after due date, grace period, Credit Card Rollover BalanceCredit Card Finance Charges: The interest-free credit period is not applicable if the previous month’s balance has not been cleared in full.

Credit Card Rollover Balance: If you are considering to make a credit card payments after the due date, you need to be aware of the charges and the benefit you will lose in doing so. Not paying the credit card outstanding balance in full on the due date will make you incur interest and penalty, besides losing the interest-free period on new purchases.

Make sure you end up paying the entire bill of the credit card before or on the due date. Even if one is required to pay only the mandatory 5 per cent on the due date ( to avoid paying the late fee), choose to pay 100 per cent. By carrying forward the dues, one may have to pay an interest rate of 36-42 per cent per annum or even higher.

Credit Card Finance Charges

Such interest rate applicable in credit cards is known as Finance Charges in the credit card statement.
Finance Charges are payable at the monthly interest rate on all transactions including unpaid EMI installments from the date of the transaction in the event of the Cardholder choosing not to pay his balance in full and on all cash advances taken by the Cardholder, till they are paid back.

If you make partial or no payment of Total amount due before Payment due date i.e. if you have an outstanding balance from previous months and in the current month, full payment of Total amount due is made before Payment due date then Finance charges will be levied on the closing balance till the payment date.

Credit Card Rollover Balance

By rolling over, one has to pay a high-interest rate till the entire outstanding on the card is paid in full. Further, one loses the advantage of the interest-free period. Typically, all credit cards give interest-free credit period on cards before the due date arrives, however, if the entire bill amount of the previous cycle has not been paid, this advantage is lost.

The interest-free credit period could range from 20 to 50 days subject to the submission of claims by the merchant. However, this is not applicable if the previous month’s balance has not been cleared in full or if the Cardholder has availed of cash from any ATM.

So, if you even if have a balance of say Rs 2,000 on your card and you make fresh purchases in the next month, you will not get any interest free period on the new purchases.

Also, if one fails to pay the minimum amount due, the penalty can be as high as Rs 900 depending on the due amount. If you have an outstanding balance, it’s better to clear the dues and then make fresh purchases. Not clearing dues will lead to a debt trap and will also damage your credit score.

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