What happens if you default on your credit cards


Credit card is a popular and convenient non-cash payment instrument today. There is no worry if you pay your credit card on time. In contrast, missing a payment will cause you some troubles.

Here are what happens if you miss your credit card bill payment and why you should consider timely payment your top priority:

Increased financial pressure

When you are unable to pay your credit card debt, along with late penalty and interest, your financial pressure will become much heavier. According to BIDV’s policy, penalty for customer’s breach of commitment is 4% of the total amount of late payment. The higher the amount of debt and the longer the overdue period, the higher the penalty you will have to pay, and your debt will fall into Group 5, or “loss loan”. Late interest rates range from 15% to 18% per annual, depending on type of cards, which may be up to 30% for long overdue debt. This interest period will end upon your full payment.

Lower credit score

Depending on your outstanding balance and financial situation, your debt will be classified from Group 1 to Group 5 and displayed on the National Credit Information Center (CIC) system, where customer’s credit information is stored; it will then be analyzed for SBV’s management requirements. Accordingly, Group 1 debt is considered "standard loans" for loans that are timely paid or overdue for less than 10 days. Loan groups will increase gradually until Group 5 depending on your debt situation.

Bad debt from credit cards (from Group 2 to Group 5) will certainly lower your credit score on the CIC system, ruining your reputation with banks, thus adversely affecting your credit future. It will be harder for you to access any additional loans at any legitimate banks or financial institutions. You will also have difficulty in increasing your card limit because no bank is comfortable accepting increasing limit for those who often miss their payment due date.

The bank will "chase" you in every way

The bank will use all measures from SMS, email to phone call to remind you, especially after 3 consecutive overdue payment periods. At that point, instead of ignoring, you’d better directly answer the bank, through which they can provide you with some relevant solutions.

Without any discussion between the two parties, the bank will frozen or close your card immediately to avoid any new spending.

To avoid those problems, you should carefully make your purchase plan using credit card, because this card can become a financial "rescue" for you in many cases, but can also ruin your credit reputation quickly without your timely repayment plan.

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