Once you stop paying credit card bills, things can go downhill fast. If you get a sinking feeling in your stomach when your monthly bill comes in, it is crucial for you to understand the consequences of missing payments. Here is what you can expect to happen when your credit card bills are left unpaid.
Accumulation of fees and interest
The first consequence of not paying credit card bills is an increase in your interest rate and minimum payment. As late fees are continually added onto your balance, your minimum payment increases each month. If you have not paid your bills for 60 days, your credit card company may kick in a penalty rate, which also increases your finance charges.
Increased collection efforts
If nonpayment continues to be an issue, the creditor's billing department will likely contact you by mail, phone or email to collect payments. These are typically gentle reminders until you get further behind. You may receive a settlement offer if payments are not made after months of calls.
Credit score decreases
Late payments are reflected on your credit report and decrease your credit score. This can affect your chances of getting a loan, job or another credit card. Your insurance rate might also increase because of your decreased credit score.
Moved to a collector
If your account becomes a charge-off, it will likely be transferred to a collection agency until it is paid off or bankrupted. Your account may be moved around to several different agencies until either of these actions is taken. A debt collector or your creditor may sue you until you pay or bankrupt the debt.
Understanding your options
Your best-case scenario is that you are able to salvage your credit. Consulting with a credit counselor can help advise you on your options. Realizing the consequences of ignoring your balance can help you get back on track and find ways to avoid the damage.
If it is too late to save your credit balance, you may want to officially file for bankruptcy. This is an option that comes with many benefits and negatives simultaneously, but sometimes it is the only solution in a difficult financial situation. Filing for bankruptcy can stop creditor harassment and get you back on track to a more secure future. Following bankruptcy laws and navigating proceedings can be complicated to do on your own. To better understand the process and make sure you do everything correctly, get the help of a bankruptcy attorney.