What happens if you don’t pay credit card bills and what to do
So, one more month has passed and you couldn’t pay your credit card bills on time, not even the minimum payment.
You are not alone: as per the survey by WalletHub, the average American household is in $8,788 credit card debt. Unfortunately, 62% of people have said that they would go into credit card debt due to their frivolous spending. So, we can understand, thousands of people are not taking their credit card statements seriously. They are not even bothered to make the credit card minimum payment.
Shockingly, the wallet hub survey has also revealed that some people are even ignorant about the consequences of ignoring the credit card bill. They think that credit cards are free money!
So, today’s article is about the consequences of not paying the credit card bills on time. And what to do if you can’t pay your credit card bills on time.
What are the consequences of not paying the credit card bills on time?
Ted Rossman, industry analyst at CreditCards.com has said that you will be in a tough financial situation if you don’t pay at least the minimum payments on time.
Here’s the real meaning of falling into a “Tough financial situation”
You will be charged late fees
Once you cross your credit card bill’s due date, you will start incurring late fees. Unfortunately, the penalties will start adding up quickly and you will be in more debt. Every time you miss a due date, you will be charged a fee as a penalty.
Your account will be delinquent
If you cross the entire billing cycle without making a payment, your credit card issuer will report your account as 30 days past due to the credit bureaus. This will drop your credit score. The more payments you will miss, the worse your score will be. Your account will be delinquent.
You will start getting creditors’ call
If you again miss a billing cycle(60 days), then you will get calls from your creditors. If you still don’t pay your bills for 90 days, your available credit limit will drop by some points. You will also start incurring more interest on your debts.
Your account will be charged off by the issuer
If you still don’t make payments, the creditors will consider your accounts as a loss. They will report to the credit bureaus to consider the accounts as charged-off. When your account is charged-off, it means you are unable to pay off debts, so you need to pay the tax on the canceled debts.
You can get collection calls
Once the creditors understand that you can’t pay off debts, they usually sell the accounts to the debt collectors to manage their loss. This will hurt your credit score severely as you will get collection accounts on your report. You get collection calls, which can be a nightmare.
The creditor can file a judgment against you
The credit card issuer can also force you to pay the bills by taking legal action against you. The judgment will be recorded on your credit report and, it will affect your score negatively. The court will ask you to repay the debts. If you can’t afford it, then the court can sell your property to repay your debts. This is why you shouldn’t ignore your credit card bill payments.
However, there are always some ways to get rid of your debts.
What to do if you can’t pay your credit card bills on time
Well, you may not be able to pay your credit card bills on time. But, you shouldn’t ignore the bill. There are some actions you can take to lessen the intensity of the situation.
Here you go:
1. Inform your credit card company about your financial hardship
If you think that you can’t pay your credit card bills on time, you should inform your credit card issuer regarding it. You can negotiate for an extended payment time by explaining a genuine financial hardship situation.
If you are a potential customer with a history of timely payments, your issuer can agree to your proposal. If your financial hardship is too intense, you can even request to waive the late fees. However, you have to assure them about clearing all the payments by the next cycle.
2. Transfer your balance
If you can’t afford your credit card bills, you can transfer the high-interest balance to a low-interest card. Some credit card companies offer a balance transfer card at a very low introductory interest rate. You can transfer your credit card balances to this balance transfer card and payback within the stipulated amount of time. This will help you to reduce the APR. However, you should repay the balance within the introductory period. Otherwise, the interest rate can increase.
3. Consolidate the bills into a personal loan
If you are unable to manage your credit card bills along with other monthly bills, then you can consolidate your bills. You just need to take out a loan to repay all the due bills. Now, you just need to manage the new loan properly. However, you should try to take out the new loan at a lower interest rate. If your credit score is good, you can get a loan at favorable terms and rates. Shop around to get a loan with a lower interest rate. Credit unions can help you to get such a loan.
So what do you learn from this article? The main point is that skipping a credit card bill can be dangerous for your financial health. You should try to pay the bills in full and within the time since credit cards are not free money. This is one of the loans that you are taking out. Thus, you are liable to repay the bills. However, financial ups and downs can be there. So, you should manage that phase tactfully instead of ignoring the bills.
Remember, keeping a credit card is not enough; you should learn how to manage it. There is no doubt that credit cards are convenient tools to make necessary purchases. But you shouldn’t use these tools to buy things that you can’t afford in cash.
Hence, you should learn how to manage your credit cards before going to swipe them.