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Tata Capital > Blog > Generic > How to Avoid Credit Card Defaults?

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How to Avoid Credit Card Defaults?

How to Avoid Credit Card Defaults?

Swipe, spend, and repeat. Credit cards have become a popular payment option among many individuals, offering a range of benefits that add convenience and luxury to their lives. Swiping a credit card can be thrilling, but it also entails significant responsibility.

Frequent missed payments, overspending even if you have a lower credit card limit, or delays in bill payment can lead to credit card default, harming your financial profile.

Therefore, you must be mindful of your credit card practices. In this blog, we’ll explain what is a credit card default and how you can avoid it.

What is a credit card default?

A credit card default is when you do not pay the Minimum Amount Due (MAD) on your credit card for several months in a row. If you fail to pay the bill only once or twice, it will not make you a defaulter. The credit card issuer typically sends a default notice after you have missed six consecutive payments.

If you become a defaulter, you have to face these consequences:

#• It will have negative impact on your credit score and will reflect on your credit report for up to seven years.

#• The issuer will levy a late fee and interest rates, which will increase your outstanding credit card bill.

#• Your credit card can be blocked if you miss payments frequently.

#• Not addressing credit card default can result in legal action, and it will be potentially labelled as fraud.

How to avoid credit card defaults?

Prevention is always better than cure. Follow these practices to avoid credit card defaults:

#1. Make timely payments

Set up payment reminders or auto payments to ensure you do not miss the due dates. Make a monthly budget and keep the credit card amount aside so you have enough funds to pay back.

#2. At least pay the minimum amount due

If you are struggling with funds, pay the minimum amount due on time and use the interest-free period to repay the remaining balance.

#3. EMI option

If your credit card bill is high, ask your issuer to convert it into manageable monthly instalments called credit card EMIs. This makes it easier to handle payments comfortably.

#4. Use credit responsibly

Be mindful of the credit limit and avoid maxing out your credit card. Maintaining a low credit utilization ratio (ideally below 30%) demonstrates responsible credit usage and can positively impact your credit score.

The bottom line

Being a credit card defaulter can significantly impact your financial profile, CIBIL score, and peace of mind. Therefore, it is essential to be responsible, prepare your budget, and refrain from exceeding your credit card limit to avoid these negative effects.

Are you wondering, 'How do I manage my credit card effectively?' Choose trusted issuers like Tata Capital Moneyfy. Enjoy features like pre-approved offers, convenient transactions, and rewards with credit cards from leading providers. Simplify your credit card management through the user-friendly Tata Capital Moneyfy app and website and avoid defaulting on the payments.

 Download Moneyfy App
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