With the mounting credit card bills, not making credit card payments might sound rather appealing. It would come as a major relief not to pay a large sum of your income or savings every month, especially if you face financial difficulties.

Unfortunately, you will face damaging consequences that would place you in even worse financial trouble. Initially, the impact might not seem too big, but you will soon find yourself in debt. So, what happens when you stop paying credit card bills? Let’s find out.

Multiple Stages of Credit Card Nonpayment

Your credit card payment will be considered late after 30 days of nonpayment, but it won’t be included in the credit report yet. In some credit cards, the late payment is charged after 60 days.

While missed payment or two won’t be added to your credit score or reported to the credit bureaus, you will face late fee charges. More missed payments will result in more severe consequences that would significantly impact your financial situation.

The impact and timeline might vary based on the credit card company, but you will go through the following stages:

  • Day one to Day 30: A late fee will be added to your outstanding balance, along with an interest rate.
  • Day 60: The creditor may report you to the credit bureaus, and an APR penalty might be charged.
  • Day 90 to Day 150: The interest rate and late fee will continue to increase.
  • Day 180: Your account could be blocked or closed if the creditor hasn’t done this already. The case will be forwarded to the credit collection agency.
  • After Day 180: The collection agency or creditor could file a lawsuit against you for unpaid debt.

Consequences of Not Paying the Credit Card Bills

Here are some of the major things that you would have to face when you stop paying your credit cards:

Interest Rate and Late Fees Starts to Accumulate

Firstly, your creditor will charge a late fee, and your minimum payable monthly amount will also increase. One of the most damaging parts is the high-interest rate you will be charged for missing the payment, particularly after 60 days of non-payment.

The minimum payment due will increase every month, with more late-payment fees being included in your balance. Once the penalty rate starts, it will also increase the finance charges. As a result, your outstanding balance gets larger, making it more difficult for you to catch up.

Credit Score is Drastically Impacted

After 30 to 60 days of nonpayment, your credit card issuer would report your missed payments to the credit card bureaus. The credit card payment history plays an integral role in the credit score.

Missed payment will reduce your credit score and damage your creditworthiness. The number of points you might lose would depend on your credit profile. Individuals with excellent or good credit scores tend to lose a high number of points from a late payment. While people with a poor score would also lose points, the drop won’t be as much.

Your account will continue to be reported as late with more missed payments. It is integral to note that late or missed payments are kept on your credit report for as long as seven years and continue to affect the credit scores.

A High APR Penalty is Charged

You will be charged with an APR penalty after 60 days of nonpayment, which will be applicable to your future transactions and your existing balance. Your account will be restored to the standard APR after making six consecutive timely payments.

Collection Agency gets Involved

When you continue to neglect to pay your credit card bills, your account will be reported to the credit collection agency. All the charge-off accounts are continuously moved from one agency to the other once they are either completely paid or eventually get bankrupt.

Possibility of Being Sued Increases

The debt collector or your creditor might also file a case against you to force you to make the due payment. If they win the case, it might allow them to directly take money from your paycheck or your bank account, depending on the judgment.

The judgment will automatically favor the creditor if you ignore the case after being served with the lawsuit.

All of these consequences can significantly impact not just your credit score and financial situation but also different aspects of your life.

Measures to Take When You are Late on Credit Card Payments

It is essential to understand that the longer you neglect making the credit card payments, things will continue to get worse for you. To avoid being in this situation, here are some steps you can take for better credit and debt management:

Assess your Budget

Reviewing your budget will help identify areas where you can decrease your expenses to make timely credit card payments. Figure out ways you can further save money or increase your monthly income.

These steps will enable you to at least make the minimum due payment every month. Moreover, avoid using credit cards until you are caught up on all the outstanding amounts.

Contact your Credit Card Company

You can always contact your creditor to explain how you are experiencing difficulties paying the credit card bills. Often, creditors are willing to provide a suitable repayment plan or even waive off the late fee to make payment easier.

It is best to contact them when you realize you could miss the payment or have already missed a payment. Many people are afraid to call up their creditors to inform them about their financial struggles, but you would be surprised at the assistance you may receive.

Go for Debt Consolidation

You also can use a debt consolidation loan or credit card balance transfer to manage your payments effectively.

The debt consolidation loan places your entire credit card bills into a single payment spread out in affordable monthly payments to manage your finances better.

The credit card balance transfer comes with a 0% APR for a year and enables you to transfer the outstanding balance with a promotional interest rate.

Consult Credit Counseling Agency

Credit counseling agencies will review your finances and create a debt management plan and an efficient budget to make it easier to make the payments. It is integral to immediately seek expert consultation when you start struggling with your finances.

Certain credit counseling agencies even offer the initial consultation for free, but a debt management plan does require a fee. However, a good credit counseling agency can get you out of the financial burden and give you more control over the situation.

Consider Bankruptcy

You can also consider filing for bankruptcy in case of overwhelming credit card debts. There are two types of bankruptcy that could help you based on your situation:

  • Chapter 13: You can create a plan for debt repayment while keeping your assets. This bankruptcy remains on a credit report for up to seven years.
  • Chapter 7: You can get all your debts erased but some of your assets will be sold to pay your creditors.

Setting Up for Success

Not making credit card payments can result in credit-damaging and expensive consequences. You can avoid this by making the minimum due payment on time to avoid impacting your credit score and getting APR penalties and late fee charges.

Keeping track of your expenses and income by creating a budget can be a major step in avoiding missed payments. You can also set up automatic payments to make timely payments.

However, if you are struggling with your finances and know you would miss a payment or two, it is ideal to talk to your creditor to develop a better credit payment plan or consult a credit counseling agency for assistance.

If your credit score has already been impacted, you must continue making timely credit card payments to rebuild the score gradually. Keep in mind that it would take time, so be patient and take mindful measures to manage your finances.

About the author

Chris Muller picture
Total Articles: 281
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter.