What Happens When You Don’t Pay Your Credit Card Bill?

What happens when you don't pay your credit card bill?

The average credit card debt in America is $5,331. Most people aren’t able to pay off their debt in full each month. That leaves most of American’s with thousands of credit card debt that they carry for months and even years. If a catastrophic events happens such has an job loss, illness, or economic collapse, and you can’t pay your credit card bill what happens? Here we will talk about what happens when you don’t pay your credit card bill.

If you are in a difficult financial situation and you don’t pay your credit card bill, we will cover what will happen from the first day to months down the road.

1-Day Late Paying Your Credit Card Bill

If you are one day late on paying your credit card bill you will surely face a late fee. The late fee is usually around $35 to $40 but the price will depend on your credit card company and the terms of the credit card you have.

Late payments are reported to the credit bureaus every 30 days, so if you are a day late paying your credit card it won’t affect your credit score.

While being one day late paying your credit card won’t affect your credit score, you should still try to pay your credit card on-time every month. Even if you can only pay the minimum.

You will also pay interest due to the fact that you didn’t pay off the entire amount of your debt. Depending on your debt and the interest rate set by your credit card company this could only a few dollars or several hundred dollars so keep that in mind.

Some credit card companies might be able to waive a late fee. If you have been a loyal customer of the credit card company for some time they might waive the late fee if you call and ask.

Related: How To Pay Down Credit Cards

30 Days Late Paying Your Credit Card Bill:

Most credit card companies are required to report any late payments and the amount of debt you have every 30 days.

Once the late payment is sent to the credit bureaus, it will show up on your credit report and will negatively affect your credit score.

90% of lenders use the FICO score to determine your creditworthiness and 35% of your FICO is on-time payments. So if you have any late payments, even one late payment, can lower your credit by as much as 100 points.

Related: Everything You Need To Know About Your FICO Score

Not only will your credit score be affected but you will be paying more in interest and more in late fees.

If you use a credit card that offers cashback rewards for your purchases, you will be unable to receive any cashback rewards if you don’t make the minimum payment. This will stay in effect until the lender reinstates your account in good standing. Make sure you read all the terms of your credit cards.

Related: Can Creditors Remove Late Payments From Credit Report?

2 Months Late Paying Your Credit Card Bill:

When you are 2 months late on paying your credit card bill, credit card companies will review your old interest rate and impose a penalty APR of up to 29.99%. Check your credit card terms for this penalty.

This is time when not being able to pay your bills starts to add up and get very expensive. After 2 months of not making any payments, the credit card company will this as a red flag and a risk for them to continue doing business with them. The result is an increase your interest rate, multiple late fees, and low credit score.

You usually get stuck with this jack-up rate, even once you resume payment. Under the Card Act of 2009, card issuers are required to review the penalty APR only after repeated six monthly payments.

Related: 8 Best No-Interest Credit Cards 

3 – 6 Months Late Paying Your Credit Card Bill :

At this point, you most likely have incurred hundreds of thousands of dollars in late fees and interest and your credit score has taken a huge decrease which will make it almost impossible to open new accounts or get approved for loans. This mark will stay on your credit report for seven years.

Each lender has different policies regarding how long they will keep a bad debt for, sometime between three and six months, most credit card companies will sell your account to a collections agency.

During this time you will need to start looking into way to repair your credit.

Related: Things You Need To Know About Credit Repair

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How do collection agencies work?

Collection agencies and businesses who specialize in collecting debts that people have failed to pay. This can include credit card bills and healthcare bills.

When you fail to make payments on your debt for a long period of time, the lender will consider you a lost cause in paying back the money they lent to you and to reduce their losses, they will sell that loan to a collection agency at a discount.

For example, if you have a debt of $2,000, the lender might sell this debt to a collection agency for $100. It is then up to the collection agency to get the debt paid by you. If you agree to pay the debt in full for $2,000 the collection agency will profit the difference.

Related: How To Dispute Your Credit Report Information

How do I pay off collections?

How Do I Pay Off Collections?

When a collection agency calls, emails, or shows up at your door to get you to pay your debt you can negotiate. We know that collection agencies buy your debt for pennies and they profit from the difference. So the power is in your hands. While you will have to pay something, you don’t have to pay back all of your debt. The collection agency will try to get as much as they can from you, but they negotiate to get you to pay something so they can make money.

Know Your States Statue of Limitations

If you have an old debt, there is a statue of limitations on your debt. This means that after a certain time period, such as 5 or 15 years, debt collectors can no longer use the courts to force you to pay your debt. This all depends on your states regulations.

Related: How To Deal With Creditors When You Can’t Pay

Tips to Avoid Late Payments

  • Schedule automatic monthly payments.
  • If you can’t pay off your credit card in full, pay the minimum.
  • Use MyFICO to monitor your credit score.
  • Make bi-weekly payments when your paycheck comes in.
  • Use a Budget app like Quicken that allows you see all your income, bills, and investments all in one place.
  • Cancel subscriptions and lower bills with BillShark

Pay your bills on-time. It will become very expensive and affect your credit score to the point where you might have a hard time getting a loan, buying a new car or getting approved for the home or apartment you want.

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