You’re overwhelmed with expenses and bills this month, and you don’t have enough money to cover the minimum on your credit card bills. What do you do? When you get your monthly statements, you’re thinking of just ignoring some of them this month, but aren’t sure if it’s a good idea. After all, what exactly happens if you don’t pay your credit cards?
This situation is less than ideal, but it can happen to any of us struggling with credit card debt. It’s not always clear what the actual consequences are of overdue or unpaid credit card bills other than late fees and more interest, so here’s a quick breakdown of different scenarios when you can’t pay your credit cards and what you can do to handle the situation.
You Can’t Make a Payment This Month
The credit card due date hasn’t passed yet, but you know you can’t pay the minimum. Let’s say you’ve been responsibly keeping up with your credit card payments, but know that this month, you just don’t have enough money in your bank account to make that minimum payment by the due date.
What To Do: Instead of just missing the payment, try calling your credit card company to ask for the due date to be moved to a date when you can pay the minimum. Be sure to tell the customer service representative if this is the first time you are unable to make a payment and that unexpected circumstances have made it financially impossible for you to make the minimum payment by the current due date. You can also ask if they will waive your late fee. If your credit card company agrees to move your due date and waive your late fee, then make sure you pay your bill by the new due date.
You don’t want to be stuck in this situation again, so if your financial situation has changed and/or your monthly payments are just too large for you to keep up with, you can also consider debt consolidation to help you reduce your total monthly payment. You can learn more about debt consolidation here and check for loan offers through ReadyforZero’s free and easy debt consolidation loan tool. This loan application won’t affect your credit score and provides you with just another option to consider if you know you’ll be struggling again next month to pay your minimum payment.
You Miss One Credit Card Payment
If you’ve missed your payment or paid less than your minimum this month, then you’ll be immediately charged a late fee, which ranges from $25 to $35. The late fee is added to your balance.
Your credit score might also take a hit, but only if your payment is late over 30 days. If it’s been over 30 days from the missed payment due date, it’s possible the credit card company has already reported your missed payment to the credit bureaus that maintain your credit report and compile your credit score. They are more likely to report you after 30 days if you have a history of late or missed payments.
The worst possible outcome of one missed payment is an increase in interest rate on any new purchases. If you had signed up with an introductory or special interest rate, you might lose that rate after just one missed payment. Your interest rate can increase as much as 10%. That means your card with 15% interest rate could go up to as high as 25%! In the long run, that could be hundreds or thousands dollars of difference. To understand more about what might happen from just one late or missed payment read this post.
What To Do: Make the minimum payment as soon as you can.
If you have the money, but you’re just constantly forgetting to pay your minimum on time, set up automatic payments so that you make a minimum payment on the due date. You’ll never make a late payment again.
If you’re struggling to make the payments because the amount is just too much, consider debt consolidation to reduce your total monthly payments. You can check for loan offers with ReadyforZero’s free and easy pre-approval debt consolidation loan tool here.
You Miss Two Credit Card Payments
You’ll be charged another $25 to $35 late fee, and you’re in dangerous territory for affecting your credit score. A 30 to 60 day late payment can have a dramatic affect on your credit score.
Regardless of your current credit score, a 30 to 60 day late credit card payment can lower your credit score by 60 to 110 points. With a lower credit score, that means you will have to pay higher interest rates on any of your future credit cards or loans (home mortgages, auto loans, etc.…).
You will start receiving calls from the credit card’s in-house debt collections agency reminding you to make a payment and warning you of the consequences of non-payment.
What to Do: Talk to the in-house collections agency. The in-house collections agency might offer plans to help you settle your debt without you having to pay the full amount. If you have some money, you can try to negotiate a payment plan that you can afford and avoid some of the late fees you have and will accrue overtime.
You Miss 6 months (180 days) of Credit Card Payments
At this point, you have been charged many months of late fees, and, once you’re over 90 days late on a payment, then your credit score has definitely been affected. You have multiple missed payments on your credit report, and your credit score has certainly plummeted to sub-prime (less than 660) and possibly even below 600. This will make it very difficult for you to borrow money in the future.
What To Do: Since the credit card company has failed to get you to pay them directly, they sell the debt to a third-party collection agency that will then try to collect from you. Though your original creditor or credit card company has given up on collecting the money you owe, the third-party collections agency will do its best to make you pay your debt. They probably won’t be very polite and often use intrusive tactics to contact and pressure you to pay. There are laws to protect you from the worst types of harassment debt collectors have used in the past, so know your rights and report any abusive behavior. Read more on how to deal with debt collectors here.
You Miss Many Years of Credit Card Payments
There are serious consequences if you don’t pay your credit card debt that will affect your long term ability to buy a house, car, or borrow money at all in the future. But what if you don’t make a payment on your credit card debt for many years? You might wonder: Is it still worth paying my credit card debt?
Your creditors can sue you with the statute of limitations being anywhere from 3 to 10 years depending on which state you live in. It is also important to note that in some states, if you do make a payment or even acknowledge that you owe the debt, you cause the statute of limitations (for your creditors’ ability to sue you) to begin anew.
Technically, your failure to pay your credit card bills will fade from your credit report after 7 years, but having your debts forgiven by the law will take many years and may depend on your state. So if you plan to “wait it out,” you run the risk of being sued by your creditors with no option of borrowing money since you will have extremely poor credit.
Hopefully, you won’t find yourself in the more dire of these circumstances or ever even have to ask yourself “What happens if I don’t pay my credit card bill?,” but if you do, at least you now have enough information to move forward and begin your journey to get out of debt.
To help you keep up-to-date on your credit card debt and payments in the future, try using ReadyForZero for a free and easy plan to get out of debt faster. If you have more questions about credit card debt, please visit ReadyForZero’s Credit Card Debt Resource Center for more information.