Naresh, 34, is an IT employee who earns a handsome income. But, one of his biggest flaws is that he keeps on postponing money decisions. Whether it’s paying his credit card bills on time, insurance premiums, or other utility bills, he fails to make the payment until he receives a reminder from the credit card or insurance company notifying him of a missed payment.

Naresh takes this lightly as he can very well afford to pay the extra hundred-odd rupees as late fees along with his credit card bills and insurance premiums. He doesn’t mind the delayed payments as he doesn’t see any significant impact on his financial life due to these frequent late payments.

Wrong! Naresh was in for a huge shock when he tried to apply for a home loan. His credit scores were lower than he expected and his credit report had a record of all his delayed bills and EMIs. He didn’t realise that delayed bill payments not only attracted late fees and penalties but could also severely dent one’s credit score.

If you’re like Naresh, then this post is for you. Here, we walk you through the consequences of not paying your credit card bills and insurance premiums on time. Let’s check out what happens when you miss credit card bills, insurance premiums, loan EMIs and other bill payments.

Delayed Payments can affect you in Multiple Ways 

A history of delayed payments can affect your financial standing in several ways.

1. Delayed Payments show up in your Credit Report 

Whether it’s a one-time delayed credit card bill or frequently missed loan EMI payment, you can be sure that any delayed payment will show up in your credit report. Repeatedly delayed payments can negatively hurt your credit score.

A low credit score can hurt you when you apply for a loan in the future. It not only makes it difficult to secure a loan but also increases the cost of borrowing. Lenders charge higher interest rates and stricter terms to borrowers with low credit scores.

2. Negatively Impact your Credit Score

Very often, individuals falsely assume that a single missed payment will not harm their credit score. While that may be true in some circumstances, it’s still noted in your credit report. Frequent delays and missed payments can cause your credit scores to drop.

3. Rebuilding Credit Takes Time

Very often, individuals mistakenly assume that their credit scores will jump up once they start paying their bills on time. The reality is that rebuilding your credit ratings takes time. It doesn’t happen overnight. You need to be consistent with your bill and loan EMI payments for a period before your credit score can bounce back.

To avoid this, financial experts highly recommend that you get into the habit of paying your bills, loan EMIs, and other dues on time so that you don’t hurt your credit score in the first place.

4. You could lose your Insurance Coverage 

Another severe effect of not paying insurance premiums on time is that you could lose the protection offered by your insurance policy. Let’s suppose you don’t pay the premiums on time and fail to renew the policy before it expires. In that case, the insurance company is not required to provide you the coverage.

Let’s explain this with an example. Let’s say you own a car and have taken insurance on it. However, you fail to renew it before the due date. Unfortunately, your vehicle is involved in an accident. Driving your car with an expired insurance policy is punishable by law. Additionally, you cannot make any claims from the insurance company to pay for the damages.

As you can see, late insurance premiums leave you and your dependants unprotected. You no longer can enjoy the insurance company’s financial coverage, and you have to bear the large expenses out of pocket.

5. You have to pay Late Fees and Other Penalties 

Delaying credit card bill payments and insurance premiums adds to your financial burden. When you pay the bill after the due date, you have to pay extra amounts in the form of late fees and other penalties. These penalties range from a few hundred rupees to thousands of rupees, depending on the delayed bill’s cost.

Financial experts say that the money you use for paying late fees and other penalties could be used to grow your wealth. Think of it this way: instead of paying late payments, you can use the amount to invest in a SIP mutual fund or any other investment purposes. You can even spend it on things that you wish to buy.

6. You miss out on the Early Payment Discounts 

Insurers offer incentives to customers who renew their premiums before the due date. This is generally provided in the form of premium discounts. If you have a habit of paying premiums after the due date, you miss out on these discounts and have to pay extra. As a result, you are left with lesser savings for investments.

7. You could end up losing the other benefits offered by the Insurer

When it comes to insurance premiums, delayed payments could also cause you to lose other benefits like the NCB. The NCB (No Claim Bonus) is cumulative and is offered only to policyholders who are regular with premium payments. A delayed insurance premium means you forsake the accumulated NCB and have to start from scratch.

In the case of delayed credit card bills, you could end up losing the accumulated reward points on your credit card. Additionally, frequently delayed payments can cause the credit card company to lower your credit limit or increase the card’s interest charges.

All these factors harm your overall finances. So, inculcate the habit of paying your credit card bills and insurance premiums on time.

Automate Your Bill Payments to Avoid Delays

If your delays are not due to a shortage of funds but poor fiscal habits, then automating payments is a great way to avoid future delays. Sign up for the automated bill payment service offered by your bank. You can even set up an ECS facility on your bank account to clear your credit card bills and insurance premiums automatically. This way, the payments are made on time, even if you forget to initiate them.

Don’t forget to update your contact details with your credit card issuers and the insurance company. This way, you will receive regular notifications from the service providers reminding you of upcoming bill payments.

Financial Discipline is the Key to a Strong Financial Portfolio

Wrapping up, paying your credit card bills and insurance premiums on time can help you build a sound financial portfolio in the long run. So, set up reminders or automate payments so that you don’t miss them out.

Naresh, 34, is an IT employee who earns a handsome income. But, one of his biggest flaws is that he keeps on postponing money decisions. Whether it’s paying his credit card bills on time, insurance premiums, or other utility bills, he fails to make the payment until he receives a reminder from the credit card or insurance company notifying him of a missed payment.

Naresh takes this lightly as he can very well afford to pay the extra hundred-odd rupees as late fees along with his credit card bills and insurance premiums. He doesn’t mind the delayed payments as he doesn’t see any significant impact on his financial life due to these frequent late payments.

Wrong! Naresh was in for a huge shock when he tried to apply for a home loan. His credit scores were lower than he expected and his credit report had a record of all his delayed bills and EMIs. He didn’t realise that delayed bill payments not only attracted late fees and penalties but could also severely dent one’s credit score.

If you’re like Naresh, then this post is for you. Here, we walk you through the consequences of not paying your credit card bills and insurance premiums on time. Let’s check out what happens when you miss credit card bills, insurance premiums, loan EMIs and other bill payments.

Delayed Payments can affect you in Multiple Ways 

A history of delayed payments can affect your financial standing in several ways.

1. Delayed Payments show up in your Credit Report 

Whether it’s a one-time delayed credit card bill or frequently missed loan EMI payment, you can be sure that any delayed payment will show up in your credit report. Repeatedly delayed payments can negatively hurt your credit score.

A low credit score can hurt you when you apply for a loan in the future. It not only makes it difficult to secure a loan but also increases the cost of borrowing. Lenders charge higher interest rates and stricter terms to borrowers with low credit scores.

2. Negatively Impact your Credit Score

Very often, individuals falsely assume that a single missed payment will not harm their credit score. While that may be true in some circumstances, it’s still noted in your credit report. Frequent delays and missed payments can cause your credit scores to drop.

3. Rebuilding Credit Takes Time

Very often, individuals mistakenly assume that their credit scores will jump up once they start paying their bills on time. The reality is that rebuilding your credit ratings takes time. It doesn’t happen overnight. You need to be consistent with your bill and loan EMI payments for a period before your credit score can bounce back.

To avoid this, financial experts highly recommend that you get into the habit of paying your bills, loan EMIs, and other dues on time so that you don’t hurt your credit score in the first place.

4. You could lose your Insurance Coverage 

Another severe effect of not paying insurance premiums on time is that you could lose the protection offered by your insurance policy. Let’s suppose you don’t pay the premiums on time and fail to renew the policy before it expires. In that case, the insurance company is not required to provide you the coverage.

Let’s explain this with an example. Let’s say you own a car and have taken insurance on it. However, you fail to renew it before the due date. Unfortunately, your vehicle is involved in an accident. Driving your car with an expired insurance policy is punishable by law. Additionally, you cannot make any claims from the insurance company to pay for the damages.

As you can see, late insurance premiums leave you and your dependants unprotected. You no longer can enjoy the insurance company’s financial coverage, and you have to bear the large expenses out of pocket.

5. You have to pay Late Fees and Other Penalties 

Delaying credit card bill payments and insurance premiums adds to your financial burden. When you pay the bill after the due date, you have to pay extra amounts in the form of late fees and other penalties. These penalties range from a few hundred rupees to thousands of rupees, depending on the delayed bill’s cost.

Financial experts say that the money you use for paying late fees and other penalties could be used to grow your wealth. Think of it this way: instead of paying late payments, you can use the amount to invest in a SIP mutual fund or any other investment purposes. You can even spend it on things that you wish to buy.

6. You miss out on the Early Payment Discounts 

Insurers offer incentives to customers who renew their premiums before the due date. This is generally provided in the form of premium discounts. If you have a habit of paying premiums after the due date, you miss out on these discounts and have to pay extra. As a result, you are left with lesser savings for investments.

7. You could end up losing the other benefits offered by the Insurer

When it comes to insurance premiums, delayed payments could also cause you to lose other benefits like the NCB. The NCB (No Claim Bonus) is cumulative and is offered only to policyholders who are regular with premium payments. A delayed insurance premium means you forsake the accumulated NCB and have to start from scratch.

In the case of delayed credit card bills, you could end up losing the accumulated reward points on your credit card. Additionally, frequently delayed payments can cause the credit card company to lower your credit limit or increase the card’s interest charges.

All these factors harm your overall finances. So, inculcate the habit of paying your credit card bills and insurance premiums on time.

Automate Your Bill Payments to Avoid Delays

If your delays are not due to a shortage of funds but poor fiscal habits, then automating payments is a great way to avoid future delays. Sign up for the automated bill payment service offered by your bank. You can even set up an ECS facility on your bank account to clear your credit card bills and insurance premiums automatically. This way, the payments are made on time, even if you forget to initiate them.

Don’t forget to update your contact details with your credit card issuers and the insurance company. This way, you will receive regular notifications from the service providers reminding you of upcoming bill payments.

Financial Discipline is the Key to a Strong Financial Portfolio

Wrapping up, paying your credit card bills and insurance premiums on time can help you build a sound financial portfolio in the long run. So, set up reminders or automate payments so that you don’t miss them out.