Impacts of Late Credit Card Payment

Credit cards are one of the most common payment methods for the Hong Kong people because of its convenience. Many even apply for multiple credit cards in order to enjoy different offers, with each card having a different cut-off payment date. As a result, there are often cases of forgotten or late payments. Overspending may also be one of the problems caused by using credit card, and you might find difficult when repaying the credit card bill. Extra costs like interest fee and handling charge may be incurred. Do not be mistaken that a late credit card bill is only a small problem, the implications can be far-reaching.

Why you cannot overdue in credit card payments?

The reason for paying off the credit card debts on time is simple, as many credit cards' annualized interest rate can be more than 30%. If you do not pay your credit card debts on time, you may be required to pay a huge amount of interest. Apart from the credit card interest, there are several reasons that you shall pay off your credit card debts on time. 3 main reasons have been listed as below:

1. Pay additional credit card interests and handling fees

When you fail to pay the minimum amount before your credit card payment deadline, the card issuer charges you about 1-4% of the balance, or a specified amount (about $100-$400) as an overdue handling fees. At the same time, you also need to pay additional card interest as penalty.

Even if you repay the minimum payment every month, you may still need to pay a huge amount of interest for the remaining credit card balance. You may get a full picture on credit card interest fee calculation after taking a look on below example.

Assuming the credit card debt balance is $20,000. The monthly rate is 2.5% (APR 35.00%) with no new transactions, annual fees and other charges. If you only repay the minimum payment each month, the interest in total can be over HK$40,000, which doubled the amount of credit card debt. And the repayment period, including debt balance and interest, will last for around 26 years.

(Above example is for reference only.)

Therefore, we shall not underestimate the interest amount caused by overdue repayment or minimum payment.

2. Impact of negative credit history on credit scores

Even if your credit card payment is only a day late, the number of late payment bills will appear in your credit record. This will affect your credit score and make it difficult for you to apply for personal loans and mortgages, or get other loans approved when you need it. If you have repaid your credit card bills on time, but not in full (for example, if you have only paid the minimum repayment amount), your credit score will still be affected.

3. Impact on your personal development and life

If you continue to build up credit card debt, it will bring you psychological and economic stress, affecting the quality of your daily life. At the same time, certain occupations, such as law enforcement authorities, those in the financial industries, and security companies, will understand the job applicant's financial status and financial management ability based on their credit score. Your credit score will then directly affect your success rate when applying for jobs.

In conclusion, overdue in credit card payment leads to huge amount of interest fee and handling charge, brings extra financial burden, while causes psychological and economic stress. Besides, it also brings negative impact on personal credit rating, which may become an obstacle when applying loan, mortgage and other credit card in the future.

How to repay the credit card outstanding balance earlier to save interest fee?

To ensure all your credit card bills are repaid, you can shift your different credit card bill payments to land on the same day to minimize the possibility of forgetting payment. In addition, you can also use consolidation loans to repay all your accumulated credit card bills in one go, reducing the impact of late payment. Compared to most credit card issuers, Promise's debt consolidation loans are easy to apply for, which helps you save on credit card interest, shorten the repayment period and, reduce the monthly repayment amount for your credit card.

Promise's consolidation loan has an annual percentage rate as low as 1.12% and the handling fee is HK$0, while your credit card bills are calculated based on compound interest. If there are outstanding statements to be paid from multiple credit cards, it will be more cost-effective using Promise's consolidation loan as its interest is calculated on a daily basis. Also, the repayment period is relatively short and clear, helping you pay off your card debt as soon as possible.