Consequences of failing to pay credit card dues in time

Like any other type of loan, credit cards also have defaulters. And as in any other loan, defaulters face a penalty.

But can anyone land in jail if he/she missed credit card payments?

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 on the defaulter list and their credit card account will be immediately deactivated.

Here are the consequences that one would face on regular nonpayment of credit card dues.

On blacklist

Banks and credit card companies would blacklist the person if he/she fails to make payments regularly. 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, affecting all future credit requirements of the individual.

Credit blocked

Bank will first block the credit card of the defaulting customer in order to prevent him/her from using the card further. The cardholder will no longer be able to swipe the card to pay for services.

He/she can only get his services restored by clearing all the dues.

Legal action

Legal action can be taken in a court of law for credit card payment defaults. The name of the violator will also be a part of the credit card defaulter list in the country.

This can be a civil dispute and the case can be filed in a court of law.

Recovery agents

Usually, banks tend to grant customers some time to pay bills. This can extend to any period between 60 days and 90 days and varies from bank to bank.

If payments are not 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.

Credit score

The credit rating of the customers will definitely dip if there are payment defaults. This is because credit rating agencies regularly receive reports about credit card holders and their payment histories.

Behind the bars?

Most banks generally 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 and hence one cannot be sent to jail.

Penal interest

The penal interest that a bank charges for non-payment of dues even after the 60-90-day time period can be high. It is usually between 6% and 20% which keeps pushing the dues higher and higher quickly.

This interest will be charged even if there is a delay by one day after this time window.

However, this rate if interest is charged only after the period allowed to pay the bill. If payment is made within the 60-90-day time window, a penal interest rate will be charged for late payment of the dues.