What If I Don’t Pay My Credit Card Bill?

Credit cards offer several advantages over debit cards. For example, when you use a debit card, you can only spend as much money as you have in your bank account. With a credit card, you gain access to a line of credit, increasing your purchasing power. A credit card also gives you extra fraud protection. If someone gains access to your account, your personal funds aren’t at risk.

However, if you use your credit card, you also have to make a minimum payment every month. Find out what happens if you don’t pay your credit card on time.

How Credit Cards Work

A credit card is a type of revolving debt, which means your balance and minimum monthly payment change based on your spending habits. For example, if you pay your full balance before the end of your billing cycle, you won’t have a minimum payment due the following month.

Credit card companies usually calculate minimum payments based on your current balance plus a little extra to account for interest. If you have a balance of $3,000 during a 0% interest promotion, your minimum payment may be anywhere from $30 to $90. This assumes your credit card company charges between 1% and 3% of your balance.

Your minimum payment is the lowest amount due during a billing cycle. If you have a large balance, try to pay more than the minimum. Otherwise, interest charges will keep accumulating, making it difficult to pay your debt in full and causing your debt to become more and more expensive.

What Happens If I Don’t Pay My Credit Card on Time?

Failing to make your minimum payment on or before the due date can have some potentially serious consequences. Here’s what happens if you don’t pay a credit card on time.

1. Late Fees

Many credit card companies charge a fee for late payments. As of 2024, the average late fee is $32. In March 2024, the Consumer Financial Protection Bureau finalized a rule that would reduce the typical late fee to $8, but a federal judge has issued an injunction preventing the new rule from going into effect for now.

If you’ve never made a late payment before, you may be able to get your credit card company to remove the fee as a courtesy. Simply call the number on the back of your card and explain what happened. If you’re polite and let the agent know the late payment was a one-time mistake, they may remove it for you.

Although late fees can put a dent in your budget, late payments don’t affect your credit scores until you’re 30 days past due. This is when the consequences of a late payment can really start to hurt you.

2. Delinquency

Once you hit the 30-day mark, your account becomes delinquent. Credit card companies report delinquencies to the credit bureaus, causing your credit to decrease significantly. If you miss multiple payments, your scores will drop even more. Credit.com has a free credit score simulator to help you understand the effects of delinquency on your credit profile.

3. Charge-Off

Eventually, your credit card company stops waiting for you to make a payment. This prompts a charge-off, where a creditor closes your account and writes off your debt as a loss. If you have a charge-off on your credit report, you may find it extremely difficult to get approved for new accounts.

Your credit card company may even issue a 1099-C form for your canceled debt. Depending on your financial situation, you may have to pay income tax on the canceled amount.

4. Collections

A charge-off doesn’t make your debt magically disappear. You still owe what you borrowed, so your credit card company may send your account to collections. Once a collection account appears on your credit report, other lenders can see it. This may make it difficult to qualify for an auto loan, a mortgage, or another credit card.

Collection agencies may contact you frequently, but you have certain legal rights related to debt collection. For example, you can tell a debt collector not to call you at work. If a collection agency violates any state or federal laws, you also have the right to consult with an attorney.

5. Lawsuit

Some creditors are especially aggressive about getting paid what they’re owed. If your credit card company is one of them, you may find yourself on the receiving end of a lawsuit. When a creditor sues you, it’s important to appear in court. Otherwise, the creditor may get a default judgment against you before you even have a chance to tell the judge your side of the story. Then, you’ll have to repay the judgment, which may include interest and fees.

How to Recover From Late Credit Card Payments

Now that you know what happens if you don’t pay your credit card on time, it’s important to avoid additional negative marks on your credit record. Here are four things you can do to improve your financial situation.

Commit to On-Time Payments

Everyone makes mistakes. The important thing is you learn from your mistakes instead of repeating them. If you miss a payment, commit to on-time payments going forward. It may take some time for your credit to recover, but at least you won’t take an additional hit.

Open a Secured Credit Card

If you have several late payments on your record, you may find it difficult to open new lines of credit. Get things back on track by opening a secured credit card. With a secured card, you establish a credit line by making a small cash deposit. For example, if you deposit $500, the issuer may give you a credit line of $500.

A secured card works just like a regular credit card, so you can use it to make purchases at your favorite stores and e-commerce websites. If you don’t make payments as agreed, the credit card company can close your account and keep your deposit.

Pay Down Your Debt

Once you have a late payment on your record, it takes time to rebuild your credit profile. If a creditor won’t remove the late payment from your reports, there are other things you can do to help your credit. For example, try to make all of your future payments on time and in full. It won’t erase the negative impact of the late payment, but it can help your credit while you wait for the late payment to fall off your record.

Negotiate With Creditors

If you’ve never missed a payment before, try negotiating with your credit card company. A creditor isn’t obligated to remove negative information from your credit report, but if you ask nicely, they may be willing to cut you a break. This works best when you have a solid payment history.

The company representative may be more willing to help you if you have a good reason for missing a payment. For example, if a close family member passed away, it’s quite possible you forgot your due date because you were grieving your loss.

To learn more about managing your credit and credit cards responsibly, explore Credit.com’s credit card guide, and get your free credit report card now.

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