What Happens If You Stop Paying Credit Cards?
It might seem harmless to miss a credit card payment, but making late payments (even if it’s just one day late) can have repercussions. The longer you go without paying, the more likely you are to rack up fees, damage your credit score, see your interest rate soar, be harassed by debt collectors, and even face legal issues.
If you can’t pay your credit card bills, it’s important to call your creditor or get professional help right away, so you can avoid having to deal with the following challenges.
Stages of Credit Card Delinquency
Each credit card company has its own policy for managing late payments, including options to help you get your account back in good standing. Many creditors, however, will take similar actions when you fall behind. According to national credit bureau Experian, here’s what you can expect:
- 1 day late: You might be charged a late fee and, if applicable, your promotional interest rate could be canceled.
- 30 days late: The creditor will report your late payment to the credit bureaus, causing your credit scores to drop. Your creditor may also contact you to try and work out a solution.
- 60-180 days late: The credit card company will continue charging interest and may increase the APR on your overdue balance. They’ll also report each missed payment to the credit bureaus.
- 180+ days late: If it’s not closed already, your account will likely be closed and sold to a third-party collection agency, causing further damage to your credit scores.
Consequences of Not Paying Your Credit Card
If you’re struggling with credit card debt, it’s important to address the problem as soon as possible so you can avoid a growing list of consequences. Here’s what could happen:
Your Credit Card Company Will Charge Late Fees
A late fee is a fee you’re charged when you don’t make your payment by the due date. Even if you’re short of the minimum payment by a few dollars, or you’re only one day behind, you could still be hit with a fee. As a result, your credit card balance could go up.
Each creditor determines their own late fees, but there are limits to what they can charge:
- The late fee can’t be more than your minimum payment amount.
- The maximum fee allowed by law is $30 for the 1st late payment and $41 for each missed payment after that (amounts can increase based on inflation).
So, if you were to miss six payments on your credit card, you could face up to $235 in late fees.
Creditors Will Try to Contact You
When you fall behind on a credit card bill, the creditor will probably try to get in touch with you.
Their goal is usually to find out if and when you can pay and see if there’s a better solution than sending the debt to collections.
It’s a good idea to open their letters and answer their calls so you can discuss options with them, like hardship payment plans, and agree on a solution. Just make sure you don’t jeopardize your finances by agreeing to send money you don’t have.
Your Credit Score Will Be Impacted
Missing a credit card payment by a few days won’t hurt your credit scores, but a payment more than 30 days late will be reported to the credit bureaus and can-do severe damage to your credit scores.
It’s impossible to say exactly how many points you’ll lose since each person’s credit profile is different. Generally, the higher your scores are before the missed payment, the bigger the drop in points. For each additional missed payment, you’ll lose more points, and having the account go to collections can add additional damage.
A missed credit card payment will stay on your credit reports for seven years. Fortunately, the impact becomes less severe over time and you can speed up your credit recovery by adding positive information to your credit reports.
Your APR May Increase
If you fall more than 60 days behind on your credit card payment, the creditor can increase your APR. When this happens, you’ll be charged a higher interest rate on your balance and on future purchases.
In some cases, you might have an opportunity to work with the creditor and undo this damage. For example, your creditor might give you the option to return to the original APR if you make six consecutive on-time payments that cover at least your minimum payment amount.
The Account Can Be Sent to Collections
If you skip several months worth of payments, your credit card account might be sold to a debt collector. Not only does this hurt your credit, but debt collectors are known for putting a lot of pressure on debtors.
The debt collection agency might call you, or call your work, in effort to get money from you, but even if you can’t pay off the debt, you still have the right to validate the debt and stop collection calls.
You Can Be Sued for Credit Card Debt
You can’t be sent to jail for unpaid credit card bills, but you can be sued.
When you fall behind on a credit card bill, your creditor or the collection agency may decide to take legal action to get the money back. If this happens, you’ll be served with legal papers.
Failing to respond can mean losing by default, and in a worst-case scenario, a creditor can garnish your wages or put a lien on your property.
Fortunately, there’s a limited timeframe that a creditor has to sue you — between three and six years in most states—and some people with limited income might be protected from wage garnishments or other penalties.
What to Do If You Missed a Credit Card Payment
If you’re already behind on your credit card, or even if you think you might fall behind soon, it’s important to take action right away. Help is available, but you’ll have to know where to look. Here’s what you can do:
- Prioritize your debts: When money is short, you may need to prioritize certain bills like secured debt, meaning debt that has collateral against it (e.g. mortgages and car loans), and necessities like food and utilities. If there’s not enough to cover those bills, plus your minimum credit card payments, let your creditor know ASAP. Be prepared to tell them what you can afford to pay, when you can pay, and how you plan to get on track.
- Ask your creditor for help: The creditor might be willing to help you find a solution, sometimes with a forbearance or hardship payment program, depending on your financial circumstances, but you usually have to ask.
- Talk to a professional: A certified, nonprofit credit counselor can help you explore all of your options for dealing with debt, including debt consolidation, a debt management plan or even bankruptcy.
Speak to a Credit Counselor About Your Credit Card Debt
You don’t have to navigate this challenging situation alone. When your finances are shaky or you just need some support looking over the numbers, nonprofit credit counseling can help.
Certified credit counselors understand the ins-and-outs of dealing with credit card debt and they can help you come up with a plan. Plus, they can help you create a budget, communicate with creditors and get your overall financial picture in order.
About The Author
Sarah Brady is a Personal Finance Writer and educator who's been helping people improve their financial wellness since 2013. Sarah writes for Experian, Investopedia and more, and she's been syndicated by Yahoo! News and MSN. She is a workshop facilitator and former consultant for the City of San Francisco's Affordable Home Buyer Programs, as well as a former Certified Housing & Credit Counselor (HUD, NFCC). Sarah can be contacted via sarahcbrady.com.
- N.A. (2022, March 29) CFPB Finds Credit Card Companies Charged $12 Billion in Late Fee Penalties in 2020. Retrieved from https://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-credit-card-companies-charged-12-billion-in-late-fee-penalties-in-2020/
- N.A. (2022, March) Credit card late fees. Retrieved from https://files.consumerfinance.gov/f/documents/cfpb_credit-card-late-fees_report_2022-03.pdf
- N.A. (2022, September 22) When can my credit card company increase my interest rate? Retrieved from https://www.consumerfinance.gov/ask-cfpb/when-can-my-credit-card-company-increase-my-interest-rate-what-can-i-do-to-get-the-rate-back-down-en-69/
- DeNicola, L. (2020, February 27) What Happens if I Stop Paying My Credit Cards? Retrieved from https://www.experian.com/blogs/ask-experian/what-happens-if-i-stop-paying-my-credit-cards/