November 26, 2015
Are you always making late payments for your credit card? You may think missing a few payments is not a big deal. But here’s what really happens when you miss payments and why you need to stay on top of your finances.
When you miss your credit card payments, the issuers can then increase your interest rate. Reversely, if you are diligent and prompt in settling at least the minimum payment for your credit card, most banks will reward you and you will enjoy lower interest rates. This is known as the tiered interest rate structure, which is based on Bank Negara’s credit card interest rate structure. This tiered interest structure rewards those who pay their credit card bills on time. The longer the period of time which you consistently pay your credit card bills promptly, the lower the interest rate charges.
Late repayments will go on your credit report which all banks will have access to. Banks with a direct link to Bank Negara will have access to your report via the Central Credit Reference Information System (CCRIS) which keep records for 12 months. Banks can also obtain your credit report from CTOS, which keeps records indefinitely as a historical archive. Banks and financial institutions will verify your financial status by using credit reports generated by CCRIS and CTOS to verify your financial status. Once a bank sees your pattern and how you’ve been missing payments here and there, they will be reluctant to approve your loan applications. This will work against you should you want to take a mortgage, a personal loan or any other loan from banks. It will also make it difficult should you want to take on another credit card.
When you’re late in paying for credit card, most companies will charge you late payments fees. Although the charges imposed vary between banks, it is usually a minimum of RM10 or 1% of your total outstanding balance, or whichever is higher. You should also take note that you will be charged interest rate until the balance you owe is fully paid. You may think that 1% doesn’t seem like a large amount, but if you make it a habit those charges can really add up.
You should also take note that when you miss a payment, on top of having to pay the late payment charges, you will also have to pay the interest charge which are imposed on he outstanding balance after the repayment due date. Before you know it, you’ll be raking up the numbers and you’ll soon start seeing larger amounts with your credit card statements as a result of your late payment habits.
Another motivation to make sure you pay off your credit card bill even if it is the minimum payment each month is to avoid being pestered by debt collectors. Doing so will save you from the hassle of receiving calls from your creditors, especially when you’ve missed more than one payment. Worse is when you are assigned a debt collector, who may not only be visiting you at home but may even turn up at your workplace to claim the debt you owe.
Under the Bankruptcy Act 1967, a person can be declared bankrupt if a creditor shows that there is unpaid debt amounting to RM30,000 with a default of 6 months. You may think the figure is a long shot but if you don’t keep up with your payments, you may not realize as the amount quickly snowballs. Once you are declared bankrupt you will lose a number of privileges such as being barred from leaving Malaysia and the Director General Insolvency (DGI) will be appointed to manage your assets in order to settle all of your outstanding debts.
The DGI will be appointed to the person who has been declared bankrupt by the court. If you are a professional you will not be able to practice certain professions (among which are law, accounting, the medical field) and your accounts will also be frozen.
You can avoid all of the hassle and problems that can happen by not being responsible with your credit card payments. Try out these useful tips below to stay on top of your payments.