Things Business Owners Should Do If They Can’t Pay Credit Card Bills

What is a Business Credit Card?

A business credit card is meant for entrepreneurs who want to finance their businesses. The responsibility of paying bills for a business credit card lies with the proprietor. Hence, before issuing a credit card, companies include a personal guarantee into the agreement, by which it can hold a business owner liable for any debts that have been incurred.

Often, credit cardholders fail to pay their bills on time. While this may be due to several reasons, such as an economic downturn, defaulting on payments repeatedly could lead to the imposition of hefty penalties and even criminal charges. Moreover, you will also lose your credit score rating, making it difficult to raise loans from banks and other creditors.

If you are a business owner who cannot pay their credit card bills, we have listed down some of the things you can do and avoid paying fines.

What Happens When You Fail to Pay Your Credit Card Bills?

There are several consequences of failing to pay your credit card bills on time. If you have been regular with your payments previously and have missed out or made the payment late this time, you can contact your credit card company and explain the reasons behind the delay. However, if you have been making delayed payments, or failed to pay, then serious action can be taken against you.

Some of the possible repercussions of failing to pay credit card bills include:

• Blocking of credit card
• Being blacklisted by credit rating agencies
• Difficulty in accessing credit
• Reduction in the credit score
• Charging of higher rates of interest on loans

Failure to pay the credit card bill can result in the imposition of penalties that range between 30 and 49 per cent per annum on the entire amount. Additionally, the defaulter might also lose their privilege of the interest-free period for their credit card transactions.

If the cheque bounces, a case under the Negotiable Instruments Act is filed against the defaulter. A case under the Payment and Settlement Act is also registered if an electronic transfer for credit card debt payment fails due to the lack of funds.

Before filing a case, however, the credit card company sends a notice to the defaulter, asking them to pay the debt within 30 days of payment failure. After that, the credit card company can lawfully sue them.

6 Tips for Businesses Who Cannot Pay Their Credit Card Bills

If you have a business credit card and have been struggling to pay the bills, here are some steps that you can follow:

1. Make fewer Credit Card Payments

Although it is highly recommended that you make credit card payments in full to avoid interest being charged, at times, making minimum payments can help your business get through a time when cash is short. However, if you cannot do so, make sure to get in touch with your credit card company as soon as possible so that they don’t levy any hefty fines or downgrade your credit rating.

2. Convert Your Bill Into EMIs

In case you cannot pay the entire credit card bill at once, you can convert the entire amount or a part of it into EMIs, depending upon their priority and repayment capacity. EMIs are a good option since the interest rates are not too high, and the payment tenure ranges anywhere from three months to five years, depending upon the credit card issuer.

3. Credit Card Balance Transfer

Credit card bearers who can repay their bill within the next two or three months can opt for a credit card balance transfer. Under this option, the credit card debt is transferred to another credit card issued by a different company at a low or no interest rate for a specific period. This process is also known as a promotional interest-free period. However, before opting for it, you should know that the other credit card company would levy interest on the unpaid amount as soon as the grace period ends.

4. Look For Ways to Refinance

If you have unpaid amounts from various credit card companies, then refinancing your business is one of the best ways to pay back. It is not easy to make multiple credit card payments every month, and with a lean period, many businesses tend to default. With refinancing, you can always look for ways to generate some cash, which can be used to repay your debt.

5. Balance Transfer

Instead of waiting to receive money in order to pay back your credit card bills, you can always transfer the unpaid balance to a low-interest personal loan. This option will help delay your payments, but you don’t have to worry about the high rates of interest and possible fines. However, remember not to make any new transactions with your existing credit card, as the debt will only keep mounting.

6. Avoid Using New Credit

Before you repay your credit card bills completely, do not take any new credit. This means that you should not apply for a new credit card or make any more purchases with the existing ones. In addition, if you can, delay the possibility of borrowing loans. If you take any more debt, it will only snowball and leave you with a high value of liabilities.

Also read:

1) What Happens to Indian's Tax Money after Payment?
2) Top-10 Highest Tax Paying States in India
3) Why Do We Pay Income Tax in India? Importance, Applicability & more
4) Types of Direct & Indirect Taxes in India
5) OkCredit: All you need to know about OkCredit & how it works.

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FAQs

Q. Can you miss one or two credit payments?

Ans. If you have been making payments regularly, missing a payment or two should not affect your credit score rating. However, make sure that you discuss this with your credit card company first. Explain the reasons behind the delay in payment and whether an extension can be granted or not.

Q. Can I be sued for defaulting on my payments?

Ans. If you have tried to make payments by cheque or electronic fund transfer that failed due to insufficient funds, the credit card company will issue you notice, asking you to pay the amount in the next 30 days. However, if you fail to do so, a case can be filed either under the Negotiable Instruments Act or the Payments and Settlement Act.

Q. What is a promotional fund transfer?

Ans. A promotional fund transfer is a provision by which you can transfer your credit card debt from one issuer to another. The second issuer will allow you to keep the unpaid amount at no interest for a certain period of time. Once the period ends, you will be charged interest on the bill outstanding.

Q. How can I make my payments on time?

Ans. To ensure that you don’t default on payments in the future, try and download apps that keep track and send reminders of when to pay your bills. In addition, follow financial discipline, do not take on too much debt, do not apply for credit cards of multiple companies, and look for ways to refinance your business. Also, don’t forget to contact your credit card issuer if you are unable to pay the bill on time.