What Happens If You Stop Paying Credit Cards?

If your credit card bill gets layoff due to any reason, it could be a medical emergency or the card bill more than your salary or earnings, struggling to pay a credit card bill could be a serious problem for you. You will get trapped in a serious problem if you stop making credit card payments, this leads to charging late fees and very high-interest penalty rates, and all these things impact your credit in a very bad way. And if you don’t pay the credit card bills for too long, your account will be sent to collectors, and a debt collection playsuit will be imposed on you.

According to FICO, when debt collectors collect your debt, it will hurt your credit score more badly. And this credit score damage can last a long time.

You must know that a serious negative mark note remains on your credit report for up to 7 years – whether you pay 30 days or 90 days late.

What things can happen if you stop paying credit card bills?

Here is a proper explanation with an exact timeline; late fee and impact may differ:

  • One day late: In this case, the credit card issuer will charge a late fee and stop the promotional interest rate.
  • Thirty days late: The credit card issuer will send your late payment details to the credit bureaus.
  • Sixty days late: A penalty APR amount will be applied to your debt.
  • 90, 120, and 150 days late: Late payment fees and high interest continuously add to your debt.
  • 180 days late: The card issuer bank finally closes your credit card. (If you reach this stage, collect all the amount with penalties and interest and send it to the collecting agency)
  • At any point: The card issuer or the collecting agency can sue you for your debt, and the judgment will be given against you to pay the creditor money to the bank or collecting agency or order to sell your property and pay the amount.

» MORE: Can you file bankruptcy on credit cards?

Major Reasons for Not Paying the Credit Card Bills

There could be a lot of reasons for not paying the credit card debt. Here are some:

  • Fired from Job
  • Huge family expenses
  • Serious medical emergency
  • Divorce
  • Excessive usage of credit card

The reason could be anything for not paying the credit card bill. Most credit card users make their payments before the due date, and if they miss the date, a small late fee is charged. But try to pay the credit card on time because once you make a late payment, it will convert into a habit, and this habit could lead to more financial trouble in your life.

Lower credit scores

Your credit card repayment history plays a major role in your credit score. So, if you make late payments, it will decrease your score; after decreasing once, it will be hard to grow again. And if your credit score is low, you will not qualify for the competitive rates on car loans, mortgages,s and any new credit cards in the future.

If you miss your payment for any reason, your credit score won’t affect that much for at least 30 days before the due date. Your credit report is generated based on the details provided by the credit issuer. And if you make your credit bill payment before 30 days, penalty and interest will be charged, and your credit score won’t affect that much.

The credit issuer provides different methods and offers to pay the card dues, like partial payment. And most lenders and banks don’t report late payments for almost 2 months past due.

What are the Late Payment Fees

  • Firstly the credit card issuer imposes a late payment fee if you don’t pay your card dues on time.
  • The penalty charges depend on your card and current due balance. As per the Federal Credit Card Act of 2009, the penalty charges are fixed. For the first late payment, $29 will be charged as a late payment fee, and $40 for each recurring missed payment.
  • If you are enjoying the benefits of 0% promotional APR and making late payments, this promotional offer will end early, and you will have to pay interest fees on your card’s balance.

Credit Score Hit Badly

Most credit card issuer companies report your card activity to the major credit bureaus – TransUnion, Experian, and Equifax. Generally, the card information is sent after 30 days of the billing cycle.

The most important factor in building a credit score is your credit repayment history; credit card late payments will hurt your credit score and down score. The number of points decrease will depend on your creditworthiness. 

If you have a very good credit score and make late payments for any reason, your credit will lose most of the points. And for a person with bad credit who makes a late payment, the credit points won’t drop by as many points because the late payment already reflects in their score. 

Suppose you don’t make the credit card payment. In that case, the card issuer continuously reports your card activity to the credit bureaus, and your credit score decreases after passing 30, 60, 90, 120, 150, and 180.

Latimpactsent impact credit very badly because the late payment stays on your credit profile for at least 7 years, affecting your 7 years.

» MORE: Credit Card Debt Lawyers – Do I need?

Your debt may be charged off

If you don’t clear your card dues after 180 days, the credit card issuer removes the charges. This doesn’t mean your debt goes away; the card issuer is now making strong decisions and sending your account to the outside or in-the-house collecting agency. Where the due amount continuously grows, and the debt-collecting agency will now collect the dues.

The Debt Collecting Agency Can File Suit

The debt collecting agency will take all the actions to collect past due debt. They can also sue you, and if the judgment favors a debt-collecting agency, then money will be taken from your bank account or your paycheck. In some cases, agencies get a lien against your property. 

If a lawsuit is filed against you, you immediately have to take some action; otherwise, the agency will get a favored decision and collect the debt by selling your assets.

Take necessary actions to save your credit score.

If you already know that you missed the credit card bill, then you have to follow these points to minimize the charges:

  • Stop using your credit card: Stop using your credit card immediately; if you continue, then it will increase your debt and penalties. 
  • Call your issuer: Call the card issuer and explain your present situation. The card issuer could offer help because some credit card issuers offer hardship programs that waive fees and decrease interest rates for a short time.
  • Consider debt-payoff strategies: It is always advisable to make strategies to get out of debt, and this depends on your present situation. So you have to take action as per the present scenario and clear your debt.

Take Help from Certified Credit Counselor 

If you feel that the situation is complicated and challenging, you can take support from a good financial advisor. You can take help from a nonprofit credit counseling person.

You have to select a certified financial advisor to handle the situation and solve the problem. They will help you in all aspects, like creating a budget, communicating with creditors, and helping to run your finance on the right track. 

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