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What Happens if You Don’t Pay your Credit Card Debt?
by
JG Wentworth
•
October 15, 2024
•
5 min
Is your credit card debt starting to pile up?
Do you feel like you’re sinking in financial quicksand? It may be tempting to put off or altogether ignore your mounting debt, but the consequences will eventually become even more of a burden. So, what will happen if you decide to just not pay off your credit card debt? This article will explore the domino effect of not paying credit card debt, the timeline of events that typically unfold, and potential options for those struggling with credit card payments.
Credit card debt (in a nutshell)
Before diving into the consequences of non-payment, it’s essential to understand the nature of credit card debt:
- Unsecured debt: Credit card debt is typically unsecured, meaning it’s not backed by collateral.
- High interest rates: Credit cards often carry higher interest rates compared to other forms of debt.
- Minimum payments: Card issuers require at least a minimum payment each month, usually a small percentage of the total balance.
The timeline of non-payment
When you stop paying your credit card debt, a series of events unfolds:
- Missing the First Payment (30 Days Late)
- Late fee: Your card issuer will likely charge a late fee, typically $25-$35.
- Interest continues: Interest charges continue to accrue on your balance.
- Credit score impact: Your credit score may drop, but the impact is usually minor if you catch up quickly.
- Communication: The card issuer will attempt to contact you about the missed payment.
- 60 Days Late
- Additional late fees: Another late fee will be charged.
- Higher interest rate: Your APR may increase to a penalty APR, often around 29.99%.
- Credit score impact: Your credit score will likely see a more significant drop.
- Reduced credit limit: The card issuer may lower your credit limit.
- 90 Days Late
- Account freeze: Your account may be frozen, preventing further use of the card.
- Continued fees and interest: Late fees and interest charges continue to accumulate.
- Increased collection efforts: You’ll receive more frequent calls and letters from the creditor.
- Credit score impact: Your credit score will continue to decline, potentially by 100 points or more.
- 120-180 Days Late
- Charge-off: The creditor may “charge off” the debt, considering it a loss.
- Debt sold to collection agency: The debt may be sold to a third-party collection agency.
- Credit report: The account will be reported as a charge-off on your credit report.
- Severe credit score impact: Your credit score will suffer significant damage.
- Beyond 180 Days
- Continued collection efforts: Collection agencies will continue attempts to collect the debt.
- Potential legal action: The creditor or collection agency may sue you for the debt.
- Long-term credit impact: The negative mark can remain on your credit report for up to 7 years.
Detailed consequences of non-payment
1. Financial consequences
- Mounting debt: With continued interest and fees, your debt can grow significantly.
- Difficulty obtaining new credit: Future loan applications may be denied or offered at very high interest rates.
- Higher insurance premiums: Some insurance companies use credit scores to determine premiums
- Difficulty renting: Landlords often check credit reports and may deny applications with significant unpaid debt.
2. Legal consequences
- Lawsuits: Creditors or collection agencies may sue you for the unpaid debt.
- Wage garnishment: If a judgment is obtained against you, your wages may be garnished.
- Liens: In some cases, liens may be placed on your property.
- Bankruptcy: While not a direct consequence, some individuals may need to consider bankruptcy as a last resort.
3. Credit score impact
- Significant drop: Your credit score can drop by 100 points or more.
- Long-term damage: Negative marks from unpaid credit card debt can remain on your credit report for up to 7 years.
- Multiple accounts affected: If you have multiple unpaid credit cards, the impact is compounded.
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Options for dealing with unpaid credit card debt
If you’re struggling with credit card payments, consider these options before allowing the debt to go unpaid:
1. Communicate with creditors
- Hardship programs: Many credit card companies offer hardship programs that can temporarily reduce interest rates or payments.
- Payment plans: Negotiate a payment plan that fits your budget.
2. Debt consolidation
- Balance transfer cards: Transfer high-interest debt to a card with a 0% introductory APR.
- Personal loans: Use a lower-interest personal loan to pay off high-interest credit card debt.
3. Credit counseling
- Nonprofit credit counseling agencies: Seek advice from certified credit counselors who can help create a debt management plan.
4. Debt settlement
- Negotiate with creditors: Attempt to settle the debt for less than the full amount owed.
- Caution: This will have an initial negative credit score impact and potential tax consequences.
5. Bankruptcy
- Chapter 7 or Chapter 13: As a last resort, bankruptcy can provide a fresh start, but it has long-lasting consequences.
- Consult an attorney: Always consult with a bankruptcy attorney to understand the implications.
The bottom line
Not paying credit card debt can have severe and long-lasting consequences impacting your financial health, legal standing, and overall quality of life. While the situation may seem overwhelming, there are always options available. The key is to be proactive: communicate with creditors, explore debt management options, and seek professional advice when needed.
Remember, recovering from credit card debt is possible with the right approach and commitment. If you’re struggling with credit card payments, take action sooner rather than later to mitigate the potential negative impacts and set yourself on a path to financial recovery.
There’s always JG Wentworth…
Do you have $10,000 or more in unsecured debt? If so, there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:
- One monthly program payment.
- We negotiate on your behalf.
- Average debt resolution in as little as 48-60 months.
- We only get paid when we settle your debt.
If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?
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The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 51% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.