What Happens If I Stop Paying My Credit Card Debt

A credit card debt can ruin your life. An unpaid credit card debt has the potential to destroy your ability to borrow future loans. This is because every debt payment in the United States is reported to a credit bureau. As a result, your debt payment behavior is monitored and kept as a record, to be accessed by any potential lender.

Now, it is true the non-payment of credit card could be a result of sudden life disruptions. We saw an example of this situation during COVID-19 pandemic. But, credit card companies rarely care about this because they are businesses which thrive on profits from the interest payment on their credit cards.

So, what happens if you ignore a credit card debt, my good reader?

Defaulting On A Credit Card Debt

You default on a credit card, when you miss payment for a period of 30 days. It is not a crime to default on a credit card, but there are consequences of missing a credit card payment. Regardless of the reason behind a missed payment, credit card companies rarely give grace period.

So, what happens if you just stop paying your credit cards?

1. Negative Impact On Credit Score

If you stop paying your credit card bills, credit card companies will make derogatory remarks about you on their monthly report to a credit bureau. As a result, your credit score will be negatively impacted. Do you remember when I talked about What Ruins Your Credit Score?

Missing a credit card payment can drop your credit score by up to 180 points. It is ridiculous, is it not?

According to LendingTree- an online market place for loans, a missed payment can stay on your credit report for up to seven years. With a bad credit score and a missed payment on your credit report, it is going to be hard to get access to credit card, loans and credit line. This is because you are no longer considered credit worthy.

2. Penalty Fees

You can incur a high penalty fee for missing a credit card payment. This fee is called a late fee. There are some Federal limitation laws on fees. To simply put, there is a limit to how much a credit card company will charge as a late fee, when you miss a credit card payment.

Here is what you need to know about your consumer rights, my good reader.

Currently, credit card companies can charge up to $40 late fee for missed payments. As of March 23rd of 2023, the Consumer Financial Protection Bureau (CFPB) made a proposal to congress to regulate this fee to $8. It is not enacted yet, because it is still being reviewed.

You can read the Consumer Financial Protection Bureau (CFPB) document. The highlighted link will take to the US Congress website.

Personally, I think this is a good idea since some credit card companies have a penchant for charging crazy high junk fees for little debts. By junk fees, I mean fees associated with maintaining and owning a debt card. A late fee is possibly the worst that can happen if you stop paying a credit card since it tends to accumulate with time.

3. No Access To Credit Funds

If you quit paying credit card bills, you will not be allowed access to credit card funds. This is because the funds are not free money. You see, credit card companies loan you money through their credit cards with the hope you will pay it back at an agreed time.

In case of a non-payment of a credit card, your access to the money is immediately cut off. This is done to protect the company’s interest and prevent you from incurring further debt. It is the only time a credit company actually cares about you.

4. High Interest Rates

Your interest rate can change, if you are late with a payment. Credit card companies can raise your interest rate up to 29% from the promotional APR you were offered during your sign up. Yes- one late payment can affect your interest rate by that much.

It could get you into some serious debt, when you are already struggling to pay off your credit card. This is because your total debt will increase as a result of an increased interest rate. Here is what I mean.

If you owe $800 with an interest rate of 15%, your total debt is $920. That is $800 plus an interest of $120. But, an interest of 29% will change your total debt to $1032. A result of $800 plus an interest of $232!

Now, imagine your credit card debt is higher than $800. It is going to difficult to pay off your credit card debt, is it not?

5. Annoying Calls From Debt Collection Agencies

How long does it take for credit card debt to go to collections, dear reader?

It depends on the credit card company. Usually, credit card companies try to collect their debt. They will call or send you a letter, but after a while your credit card debt goes to collection agencies.

Your credit card debt may go to collection after four to six months of non-payment of debt. You do not want this, because both parties will still file bad reports to the credit bureau about your consumer behavior. As a result, your credit history will be tainted and your credit score lowered as punishment.

Personally, I will not recommend finding how long a credit card can go unpaid. If you could pay it, do it. Otherwise, call your credit card company to arrange lower monthly payments.

Do Credit Card Companies Ever Forgive Debts

You cannot get away with not paying credit card bills. Your credit card debt cannot be forgiven after 7 years, contrary to the popular opinion. But, the consequences of not paying credit card debt will be forgiven.

What do I mean by the consequences of not paying credit card debt will be forgiven?

Well, the part where there is a bad credit report about missing a credit card payment is erased after seven years. It does not mean your credit card debt is erased. You would still have the debt and debt collection agencies will try their best to collect it.

Here is something else you need to know.

There is something called a credit card debt write-off. A credit card debt write-off is when a credit card company writes off your credit card debt as a loss. What this means, is your debt is considered uncollectable.

The mistake most people make is to assume you are no longer liable for paying a write-off credit card debt. If a credit card company deems your debt as a loss, it can still be sold to a debt collection agency. The debt collection agency will follow any means by the book to collect the debt.

On the whole, just do not stop paying your credit card bills. If you are accumulating excess debt as a result of your monthly expenditures, read What Not To Do With Your Credit Card to avoid getting into more credit card debt. Otherwise, keep chipping away on that credit card debt until you are debt free.