As soon as you stop making payments on your credit card, things start to go wrong. Innocently thinking there are no repercussions when you don’t have to make your payments every month, your credit card company will soon take action if you miss one. Missed payments have a limited impact at initially, but their impact grows with time.
Interest and Late Fees Build up over the course of time.
Late fees are imposed to your credit card account if you don’t pay your credit card payments on time. In addition, you’ll have to pay the late charge and make up the missing installments in your minimum monthly payment. After 60 days past due, which is two missed payments, your interest rate will rise to the higher penalty rate. Obviously, your minimum payment will increase each month as you accrue additional late-payment costs.
Finance costs will rise as a result of the penalty rate. It’s a vicious cycle: every month you’re late on a payment, the amount you owe becomes greater. The more behind you are, the more difficult it gets to get up to speed.
Increase in Collection Efforts
A phone call, text message, or email from the billing department of your credit card company will begin to remind you of your credit card payments. Unlike a debt collector, your credit card company can’t be stopped from calling you. The Fair Debt Collection Practices Act permits you to submit a written cease-and-desist letter stating that you no longer want to be contacted. Your initial creditor, on the other hand, is exempt from this rule.
There aren’t as many calls from your creditor if you’re only a few days or weeks overdue on your payments. They’re a friendly nudge in the right direction to get you caught up on your bills. You will, however, be contacted more often the more behind you are. Aside from that, payment reminders become more strident, highlighting major activities such as charge-off and default in a more direct manner. You may one day get a settlement offer from your creditor, which will allow you to avoid paying the debt in full provided you pay a portion of the total in a lump sum.
An Impact That Will Not Disappear
Even if you make up the missed payments, the penalty rate will remain in force until you have made six consecutive on-time payments. This means your interest rate on your current debt must decrease, but the penalty rate may continue to apply to future transactions.
Impact of a credit report and score
Your credit report will record late payments if you are 30 days, 60 days, 90 days, 120 days, or 180 days overdue on a payment. These late payments will have a negative impact on your credit score, which might prevent you from getting a new credit card or a loan in the future. Credit card delinquencies may also lead to an increase in your insurance premiums.
If you don’t pay your credit card bill for six months (180 days), your account will be charged off. As a result, your unpaid debt is written off by the credit card corporation as a loss on the business.
Despite the fact that you no longer owe money, your credit report will show that you previously defaulted on a financial commitment for the following seven years.
Options for Credit Card Debt Relief
Try to save your account and keep your credit score intact if at all feasible. A consumer credit counseling firm can help you evaluate your choices if you can’t afford to pay your credit card bills. There is a phone number on your credit card bills for a credit counseling business.
Collecting Agencies may be contacted to handle your account.
A collection agency is the most common destination for charge-off accounts. In order to have their debts paid or canceled, individuals are passed from one collection agency to the next. Until the debt is paid or resolved in bankruptcy, your original creditor (or a third-party debt collector) may sue you for the debt. The statute of limitations may shield you from a court judgment after a specific period of time, but the account must be absolutely dormant for many years—and the burden of evidence will be on you.
Paying off my credit card is due soon, but when should I make the payment?
While it’s a good idea to pay at least the minimum amount due each billing cycle, the exact day on which you pay isn’t important. Your credit rating will improve as long as the firm gets payment before the due date. If paying more often helps you reduce your debt, go ahead and do it. For the sake of avoiding financing costs, you should aim to pay off your credit card in full each month.
What are my legal options for not making any further payments on my credit cards?
Credit card debt may be canceled at any time. Even if you won’t face criminal charges, you’ll still have to deal with the repercussions in terms of money. For example, the credit card company might sue you or garnish your earnings to recover the debt.