Credit Card – Sin 1 – Not paying by due date

This is probably as big a mistake as you can do with your Credit Card. Consider the charges that this mistake will invite.

FIRST:

The bank will levy late payment fee which can be as high as 5% of your outstanding amount. That does not mean that if you have only 100 Rs outstanding you can forget to pay as probably next time you will pay 5 Rs as late payment charge. This is so because all the banks have a minimum late payment charge which can be as high as 300 Rs. It simply means that even if you have only 100 Rs due and if you don’t pay then you will be slapped with a penalty of 300 Rs.

SECOND:

Bank will charge interest which can be as high 3.75% per month… (That is not a typo, it is per month) on your outstanding amount from the date of transaction. This interest charge will also be applicable on any fresh purchases that you will do. So for a due of 100 Rs you will pay roughly 45% annual interest from the date of transaction and if you make any additional transaction from the date of your statement generation, even those transactions will also be charged at the same interest rate.

THIRD:

Not to forget, the late payment penalty and interest amount also invites Service Charge and Education Cess. So let’s say, your late payment penalty is 300 Rs then it actually becomes 300 + Service Tax (10%) + Education Cess (3% on Service Charge) making it almost 331 Rs. Similar charges apply for interest amount.

FOURTH:

Few banks also apply a transaction fee for every subsequent transaction that you do after you have missed your payment due date.

These charges apply and are computed from the date of your transactions to the date you have actually cleared the dues. Try to do some maths to find how ridiculously high these charges can be.

More to come…