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

Not paying your credit card bill can have serious consequences. Your credit score could take a hit you may be charged late fees, promotional APRs could be revoked and you could trigger a penalty APR. While it may be tempting to ignore the problem, it’s important to take action quickly to mitigate the damage. This article will explain in detail what can happen if you don’t pay your credit card bill.

Your Credit Score Will Drop

One of the most significant consequences is damage to your credit score. Payment history makes up 35% of your FICO credit score calculation. Every time you miss a payment it will be reported to the credit bureaus and your score will go down.

How much it goes down depends on your specific situation, but generally you can expect your score to decline by up to 100 points if you become more than 90 days late on a credit card or other loan payment. A lower score makes it harder to get approved for credit cards, loans and other financing in the future.

You’ll Be Charged Late Fees

Almost all credit card companies charge a late fee if you don’t make at least the minimum payment by the due date. This late fee is usually around $25-35 for the first missed payment.

If you continue to miss payments, the fee may go up. For example, some issuers will charge $35 for the first late payment but $40 for the second late payment within six billing cycles.

These fees add insult to injury when you’re already struggling to pay your bill. Make sure to understand your card’s late fee policy so you know what to expect.

You May Lose Introductory APRs

If you have a credit card with a promotional interest rate, such as 0% intro APR, failing to pay on time can cause you to immediately lose that introductory offer.

Your rate will bounce up to the standard purchase APR, which is usually between 15-25%. This significantly increases the cost of carrying a balance.

Read the terms for your new credit card carefully to see if paying late will revoke special financing offers. Then be sure to avoid late payments during intro periods.

Your Regular APR Could Increase

Not only can missed payments revoke special introductory APRs, but they may also trigger penalty rates on your existing balances.

This is known as the penalty APR or default rate, and it’s much higher than regular interest charges. Penalty APRs typically range from 27.99% to 30.99%.

This punishment rate will be applied to your current credit card balance as well as any new transactions if you trigger it by paying late.

Your Credit Limit May Be Lowered

To minimize risk, issuers will often lower credit limits when cardholders miss payments. This reduces the total amount of credit available to you.

Having a higher credit utilization ratio (percent of credit used) hurts your credit scores. But being maxed out on your cards is even worse for your scores.

If your issuer suddenly lowers your limit after you miss a payment, it could drive up your credit utilization and result in a lower credit score.

The Balance Could Be Sent to Collections

If you continue to avoid making payments on your credit card, the account will eventually become severely delinquent. Once this happens, the issuer will charge off the account and may sell the debt to a collection agency.

When your account gets sent to collections, it means the creditor has given up on trying to get payment from you directly. Now a collection agency will attempt to collect from you.

This is bad for your credit because being in collections will tank your credit scores. You could be contacted by collection agents through phone calls, letters, and lawsuits. Collection activity stays on your credit reports for 7 years.

You Could Be Sued

If you still don’t make payments after your account is in collections, you may be taken to court by the debt collector. If they receive a court judgment against you, the collector can then attempt to garnish your wages or put liens on your assets.

Legal action can be expensive. You will have to cover court costs in addition to your debt. Wage garnishment and liens also allow collectors to seize your assets and property directly to settle your debt.

Act before an unpaid credit card gets to this point by working with your issuer or considering debt settlement options. Being sued is the worst-case scenario and something you want to avoid at all costs.

How To Handle Missed Payments

If you miss one or two payments, act quickly to get back on track:

• Contact your credit card issuer to ask for leniency or reduced payments based on financial hardship. Be honest about your situation.

• Consider balance transfer options to pay off your high-interest credit card debt with a 0% intro APR card. This minimizes interest fees.

• If you can’t make the minimum, pay whatever you can afford – even small payments show good faith effort.

• Get help from a nonprofit credit counseling agency to develop a debt repayment plan and manage calls from creditors.

• Avoid using the credit card any further until you get back on your feet so the balance stops growing.

• Review your budget and cut unnecessary expenses so you can allocate more money towards paying down your balance each month. Every little bit helps.

• If your financial hardship is ongoing, discuss options like debt management or debt settlement to resolve what you owe at a discount. Bankruptcy is a last resort option.

The Bottom Line

Missing payments on your credit card has the potential to damage your credit, result in piles of late fees, lead to calls from collectors and leave you vulnerable to lawsuits. It’s critical to face the issue head-on before it snowballs.

Stay in close contact with your credit card issuer and be proactive to catch up on payments using one of the methods above. With diligence and commitment to repaying your debts, you can get back on solid financial ground.