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

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Last updated on August 24th, 2023

Credit card payments can be stressful – especially during the coronavirus pandemic. Sometimes people forget when their bill is due and miss payments. Typically, this isn’t an issue if they make their payment promptly. But what happens if you decide to stop paying your credit card bill for good? Here’s what you can expect if you don’t pay your credit card bill.

Penalties and Fines

Late Fees

The first thing you can expect if you forget to pay your credit card bill is a variety of late fees and interest charges.

Many credit card companies offer a grace period for customers. This period lets cardholders pay their bill later than expected without additional penalties. The grace period varies by the issuer but is typically around 15 days.

Failure to pay on time will result in late fees. As of January 2020, card companies can charge about $29 for the first late payment and up to $40 for any late payments within six months. Fortunately, this late fee cannot exceed the statement balance, so smaller missed payments will get a smaller charge.

Penalty APR and Interest

Failure to pay your credit card bill will also result in your bank applying a penalty APR. Penalty APR is a way to reprimand cardholders who habitually make late payments. This rate applies for a period of between six-to-twelve months and is around 29.99% on average. Paying at least the minimum balance for six months can potentially reduce this penalty rate.

Of course, as the months pass, the interest on your bill will keep growing. Because of this continual interest accrual, even small statement balances can eventually result in thousands of dollars in debt if left unchecked.

Your Credit Score Plummets

According to FICO, your credit score relies heavily on paying your bills on time. Timely payments make up 35% of FICOs credit score formula, and payments 30 days late or more can stay on your credit report for seven years. This double whammy means skipping out on paying your bill can come back to bite you for years to come.

Difficulty with Future Finances

The lower your score drops, the less likely you’ll be to get new credit. It isn’t just banks that check credit scores and credit reports. Landlords check credit reports to see how likely a tenant is to miss paying rent. Approximately 70% of employers also run credit checks to see how responsible potential hires are with their finances. Skipping your credit card bills can make it tough to find a job – or a home – in the future.

Debt Collections

If you don’t pay your credit card bill for a long enough time, expect debt collectors to start calling. Credit card companies are willing to negotiate debts with customers – to a point. After several months, however, they may sell your account to a debt collector. Once this sale takes place, the card issuer will no longer discuss your debt.

Debt collectors might be willing to negotiate your bill, but this isn’t a guarantee. The collection agency may call you at home, at work, or on your personal cell phone. They might even get the IRS involved, who may garnish your wages to secure payment. Like late payments, debt collections stay on your credit report for seven years. Because of the complexity of issues like unsecured debt collections, always consider legal advice when dealing with unscrupulous creditors.

Summing It Up

Failure to pay your credit card bill can have severe consequences. These possible issues include late fees, penalty interest rates, wage garnishments, debt collections, and a severely damaged credit score. Fortunately, many card issuers provide a grace period for customers who happen to miss their due date. Additionally, contacting your issuer should be your first action if you are late with a payment. They may be able to provide forbearance options to help you get your account current. However, your primary responsibility should be to never miss a payment and to always pay at least the minimum balance due on your statement.

Related Article: How to Bounce Back from a Subprime Credit Score

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About: Cory Santos
Cory Santos

Cory is the senior credit card editor at BestCards, specializing in everything credit card-related. He’s worked extensively with credit cards and other personal finance topics, including nearly five years at BestCards. Cory’s extensive knowledge is an essential part of the BestCards experience, helping readers to live their best financial lives with up-to-date insights and comprehensive coverage of all facets of the credit card space, including market trends, rewards guides, credit advice, and comprehensive credit card reviews.

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