Admit it or not, we all love the rules of law and we love following them. We are bound to live by the rules. They keep society’s sanity intact. But at least once in our life, we have thought of being an outlaw, haven’t we?
Life happens—leaving you in the most unfavorable of situations. Low on money, high on debt and nowhere to go—that is where millions of Americans are stranded at the moment.
As if that wasn’t enough, Americans aren’t in the best of positions to pay off their credit card debt. You are looking for options and you can’t find them, which leaves you wondering—what happens if I stop paying my credit cards?
Every financially independent human being has been a victim of credit card debt. And when paying them off comes into question, we’ve all gone “eh, chuck the rules. I’m gonna stop paying my credit card debt”.
Many great philosophers and life coaches have emphasized on how one should learn the rules like a pro. After all, one can break them like an artist only if s/he knows what the rules are.
Are you wondering “what happens if I stop paying my credit card bill?” The answer might not be serendipitous to the ears. If push comes to shove and times are dire, you’d have to face the consequences.
Let us warn you—if you choose not to pay your credit card debt by stopping all payments, you’d face:
- Late Fees
- Higher penalty APRs
- Account being charged off
- Wage garnishment
- Legal suits, and
- Reduced Credit Scores
We’d recommend that you keep paying the minimum amount on your credit card bill rather than stopping payments altogether.
Here’s the complete chain of events—a timeline that explains what happens if you stop paying your credit card debt. Brace yourself, because this looks like a beautifully staged disastrous theatre play.
What Happens if I Stop Paying My Credit Cards?
Your creditor went ahead and approved your request for credit card(s) so that you borrow responsibly and pay it back on time. But when things don’t go your way, your credit card issuer has to find ways to get the money back.
When you miss out on payments and make up for it in the next payment, they won’t even mind. But credit card companies have a time frame defining stages of credit card delinquency.
Credit card companies follow a set procedure on every default and here’s how the time frame looks like:
- If your payments are 30 to 59 days late
- Timeline further expands to 60 to 89 days late
- It goes up to 90 to 119 days
- It’s been 120 to 180 days late and it’s a charge off!
We are going to discuss each and every stage of credit card delinquency to understand what happens if you stop paying your credit cards.
Tick Tock: I’m 30 Days Late (and a rebel)
Anything below 30 days and the credit card issuer won’t give a dime about why you didn’t pay. Sure, you might get a call to remind you that you have to pay, but that’d be that.
But when you’re 30 to 59 days late, you can expect your credit card tree to start shedding leaves. If you have a legit reason for the missed payments, however, give your card issuer a call and they might waive the late fees compassionately.
What happens to My Credit Score?
It doesn’t matter if you have a legit reason for missing out on credit card payments or you just stopped because you were fed up. Your credit card issuer will report to the three credit bureaus anyway, and you can’t help but take a hit on your credit score.
What about Interest and Fees?
You’ll be charged with a late fee along with the interest you owe on the remaining balance.
If you stop paying your credit cards for more than a month, the damage is serious but it can be contained with extra hustles. Crapper hits the fan when you keep on not paying.
Tick Tock: I’m 60 Days Late (I’m the danger)
It’s been more than two months now and you still haven’t paid your credit cards. As they say, trouble multiplied a couple of times is double trouble. If you wanted your credit card company’s attention, you have it now.
Consider this time period as your “last call” before it gets worse than where it already is. Every credit card company has an in-house collections department and that is where you’ll be getting a call from at first. Companies prefer dealing from their own end before moving to the debt collection agency.
What happens to My Credit Score?
If you are 60 days late on your credit card payments, then the impact won’t be as bad as it was when you crossed the 30-day mark. If you get back on track and continue your payments after the 60-day default, your credit score damage can be restored.
What about Interest and Fees?
As if it was just the late fees and penalty APR before, watch your APR scale to newer heights. The high penalty APR means your debt payoff expedition will be stretched even more. Also, expect more calls from the credit card company.
If you feel this is the worst thing that can happen, then yes. It is the worst step the credit card company can take against you on its own.
After 60 or more days of delinquency, your account will be handed over to the debt collection agency.
You were toying around just to get answers for “what happens if I stop paying my credit cards”, now would be a good time to drop the act. Unless you want to be sued, then please, continue reading.
Tick Tock: I’m 90 Days Late (and kinda scared)
Now that you’ve stopped paying your credit cards for good three months, it’s safe to say that you are nearing the point of no return. If your credit card company has its own collections department, your case would be passed on to them.
One of our own staff went past the 90-day mark and witnessed something no-so-extraordinary. “The first thing that happens if I stop paying my credit cards is that I start getting calls from debt collection agencies.”
Debt collection agencies will call you to notify that your credit card payments are due. Their tone won’t sound conversational anymore and they’ll grow demanding every passing day.
If you pass the 90-day mark, credit card companies have a legit reason to believe that you are in the state of financial trouble. Many credit card companies compassionately offer credit help advice as well.
Get ready for shrinkage in that credit limit of yours, as your penalty APR and late fees keep piling up every passing day. If you’ve got other accounts/cards with the same credit card company, their interest might shoot up as well.
Tick Tock: I’m 120 to 180 Days Late (SAVE MEEE!)
Until now, your credit card company was talking you into paying your credit card dues. But now, they’ll run after you to get that money. At this point of time, your credit card company will sell your debt to a debt collection agency, writing it as a charge off.
What is a charge off? When you are 120 to 180 days late, your credit card company sells your debt to a debt collection agency and writes it down as a financial loss in the books. That amount is called as a charge off.
If your credit card debt is charged off, your credit report will be blemished with the damage—expect your credit score to plunge. Some people are under the misconception that charge offs mean that your debts have gone away.
On the contrary, your debt has been sold to a new owner, who now has complete authority to collect the dues. Debt collecting agencies will go to extreme lengths to take back what you owe. Dust off your suit and be ready for lawsuits.
Wage Garnishment is a legal procedure implemented on debt defaulters, where a part of your income will be kept aside every month. This part will be used to pay off your debt.
What Happens After the Charge off?
Say the line below out loud:
“What happens ultimately when I stop paying my credit cards—is that I have to pay for them.”
Yes, the debt collectors will come after you and you cannot refrain from paying back the credit card dues. So get ahead of yourself and explore your options.
I’m late on Credit Card Payments—what do I do?
Since you are already way late on credit card payments, you’ve got to change things for the better. Here are some things you can do in case you’re way deep in credit card debt. Stopping your payments altogether won’t help, but this will.
Manage your Budget
Your credit card payments come out of your income. If you feel that your credit card payment is way too much in comparison to what you earn, stop using it. More importantly, shuffle up your budget and free up more money to pay off your credit card debt.
Cutting expenses don’t help as much as inflating your income does. Find ways to increase your income, even if that means picking up some side gigs. This small money might not be enough for debt payoff, but your daily latte might feel lighter if you’ve got money to spare.
Check out some of the best ways to make money online in your free time down below.
Seek Credit Counseling
If this was temporary and you expect to get up and running quickly after a few missed payments, you can seek credit counseling. A credit counseling agency will use the process of Debt Management and you’ll save big on interest and fees.
Debt collection agencies (or credit card companies, for that matter!) don’t give a dime about your financial situation. They just want a lump sum payment for your debt and they won’t mind settling for less.
Debt settlement is the process where the debt settlement company, on your behalf, negotiates with your creditors in order to reduce the amount of debt that you have to pay back.
Credit card debt settlement can be of great help and if you genuinely don’t have money to pay your creditors back, you can profit from this. Here’s a complete guide to credit card debt settlement to get you started.
Now, this might not be the best resort to get out of credit card debt, but if you really don’t have money to pay your creditors back, bankruptcy can be your true calling.
Filing for bankruptcy will eliminate your credit card debt to a good extent, but there are drastic repercussions on your financial records. There are two types of bankruptcies that you can file to reduce credit card debt:
- Chapter 7 Bankruptcy: This one will wipe most of your credit card debt, but will stay on your credit report for more than 10 years because you won’t be paying it back.
- Chapter 13 Bankruptcy: If you’ve got a regular income but can’t pay off your credit card debt, chapter 13 gives you a chance. This one stays on your credit report for 7 years as you are at least paying back something.
If you file for bankruptcy at the right time, you can save yourself from a collection lawsuit and wage garnishment.
What happens if I stop paying my credit cards? I pay anyway.
Now you know the ultimate conclusion to your expedition of not paying your credit cards. You’d end up paying them for them anyway. The question is about how much you want to pay and how much you’d end up paying in the end.
Be a responsible borrower and pay your credit cards on time. If life gets hard and you can’t carry anymore, seek alternative options to heal the wound. Don’t just stall your credit card payments—that only makes it worse.