Credit cards are one of the simplest ways to fund major purchases. But many people wonder, “What happens if I stop paying my credit cards?” Failing to pay your balance can bring financial challenges. Here’s what you can expect and how to avoid these challenges.
Keep in mind that not all credit cards are the same. You might consider finding a credit card that aligns with your budget and spending habits.
MoneyLion can help you explore a wide variety of credit card options tailored to different needs and preferences.
States of credit card delinquency
What happens if I stop paying my credit card? While the immediate consequences are relatively minor, you may face escalating challenges the longer your balance remains unpaid. These consequences can vary between credit card issuers, but you can generally expect the following.
1 day late
Paying your balance one day late is generally not a big deal, but you could still owe a late fee of up to $8 per incident. However, some credit card companies offer promotional APRs for your first year. A late payment may forfeit this benefit, causing you to pay a higher interest rate.
Additionally, consistently making late payments may trigger a penalty APR. Always check with your credit card company to see if there’s a grace period for late payments. Otherwise, even a single day can result in penalties.
30 days late
Making a late payment after 30 days will result in the same penalties listed above. But after 30 days, credit card companies may report you to one of the major consumer credit bureaus, causing a dip in your score.
This blemish on your credit score may impact your ability to secure future loans, as well as your ability to secure favorable interest rates.
60 days late
After 60 days, your credit card company will certainly report your lack of payment to a credit bureau, which could drop your score. Card issuers may also raise your interest rates.
Depending on your credit card company, you may receive notice of overdue payments, along with hints that your account may be delivered to collections if the balance remains unpaid.
90 days late
By this point, you’ll most likely have experienced late fees and penalty APRs. You may also experience a noticeable dip in your credit score. According to data reported by CNBC, an individual with a high credit score can see a drop of up to 133 points.
120, 150, and 180 days late
The longer your credit card balance remains unpaid, the greater your chances of facing additional late fees, high interest rates, and a drop in your credit score. During this time, you’ll receive escalating communications from your credit card issuer, likely warning you that your account will be closed if you fail to pay the balance.
180+ days late
After six months of non-payment, your credit card issuer may close your account entirely, meaning you can no longer use your card. Your balance does not disappear, nor will your late fees. Instead, your credit card company can turn your account over to a collection agency, which means you’ll receive repeated contacts from the agency until you submit payment. This also means that you typically will not be able to settle the outstanding balance with the credit card company since they no longer own the debt; you’d have to settle with the collections agency.
Consequences of falling behind on credit card dues
Falling behind in your credit card payments can bring a series of consequences. These consequences depend on both the amount of time your balance remains unpaid and the frequency with which you make late payments. Here are some things you can expect when you fall behind on payments.
Collection calls
Your credit card company will usually be the first to call you. They’ll remind you that your balance is due and that failing to pay can result in further fees. As time passes, they’ll also remind you that your late payments can result in your card being canceled and that your account will be turned over to collections.
Collection agencies may be particularly aggressive in calling you to receive payment and can even sue you for unpaid debt.
Penalty fee
Credit card companies could charge late fees when you miss a payment — even if it’s only a day. Historically, these fees could be high, but new rules finalized by the Consumer Financial Protection Bureau cap these fees at $8 per incident.
Increased interest rates
Late payments can affect your interest rates in one of two ways. First, card issuers offer promotional discounts such as 0% APR. Missing a payment can forfeit these promotions, meaning your card issuer will raise your rate to non-promotional levels.
Second, consistent or prolonged late payments may cause your card issuer to raise your interest rate, depending on the credit card agreement.
Damage to credit score
Most card issuers won’t report late payments to a credit bureau unless your payment is 30 or more days late. But if you are late, you can see a significant drop in your credit score. Remember, 35% of your credit score is determined by your payment history. Late or missed credit card payments can significantly impact your credit score.
Thankfully, you can recover from these sorts of blemishes on your credit report. Making a habit of paying your bills on time can help improve your score, and you can also build credit by making payments on a small loan.
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Tips to address overdue credit card payments
Is it possible to recover from overdue credit card payments? The following steps can help you navigate debt and minimize penalties for late payments.
Negotiate with your issuer
Start by contacting your credit card provider. They may be willing to waive late fees, adjust your interest rate, or come up with a payment plan that resolves your debt while fitting your budget.
Debt consolidation
Are you facing high credit card debt? You might want to consider a personal loan. A personal loan offers a lump sum that you can use to pay off your credit card balance. If you have strong credit, you can qualify for an interest rate that’s lower than your credit card’s current APR.
MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.
Seek financial counseling
A financial counselor can assess your current financial situation and offer personalized advice on how to handle your debt. To be clear, you’ll pay for these services, but counseling can be invaluable for consumers who struggle with complex debt.
File for bankruptcy
As a last resort, you might consider filing for bankruptcy. Doing so can clear your credit cards and certain other debts, though it comes at a steep price. Chapter 7 bankruptcy can stay on your credit report for as long as 10 years, and Chapter 13 will remain for seven years.
While bankruptcy codes protect assets such as your car or home, you may be forced to sell other assets.
Navigate debt and avoid penalties
What happens if I stop paying my credit cards? Your debt won’t disappear; it will usually get worse. Following these tips can help you navigate your debt and avoid the most severe penalties.
FAQ
Will my creditors keep calling me if I stop paying my credit cards?
Unfortunately, yes! In fact, the longer your debt remains unpaid, the more you can count on repeated phone calls from your original creditor or a debt collection agency.
Can my credit card company sue me if I stop paying?
Yes, credit card companies may sue you for unpaid debt. And if they turn you over to a collection agency, your debt collector may sue you to collect your debt as well.
Will I still be able to use my credit card if I stop paying?
Initially, your credit card company will allow you to continue using your credit card. However, if your debt remains unpaid for 180 days or more, your account will be canceled.
