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Do you ever wonder what happens when you quit paying your credit cards?
Many people think that they will get assessed a late fee and nothing more.
But the truth is things get a lot worse.
Your interest rate will spike, your credit score will drop significantly, and you will start hearing from debt collectors.
In this post, I share with you the timeline of when things go from bad to worse when quit paying your credit card bills.
I’ll also share with you some tips on how to avoid this situation in the first place.
Table of Contents
What Happens When You Quit Paying Your Credit Cards
Spoiler: Things Don’t Go Away, They Get Worse
One common method of dealing with credit card debt that still needs to be settled is avoidance.
However, credit card debt does not go away on its own.
But exactly what happens if you quit paying your credit cards?
Unfortunately, the consequences get worse with time.
Here’s a brief timeline of what you can expect to see as your bills continue to pile up.
Immediately After Your Payment Is Due
If you don’t make a payment by your due date, the credit card company will assess a late fee.
This past due fee is usually $40 for most credit cards.
Additionally, you will be assessed the penalty APR, which is higher than your standard interest rate.
If you had an ongoing promotion like 0% interest on a new card or a balance transfer, this promotional APR goes away and is replaced by the penalty APR.
Note that if you decide to make a payment, the sooner you make it after the due date, the better.
This gives you some negotiating room to ask for the late fee and penalty APR to be waived.
If you are a good customer always paying on time, most credit cards will waive the fees for you.
After 30 Days Of Non-Payment
A payment that has still gone unpaid 30 days after its due date has the biggest negative impact on your financial health and wellness.
After the first missed payment, you will start to notice that the late fees and interest charges are raising your amount due higher and higher.
Even worse, your credit score is likely to drop as your non-payment will be reported to major credit bureaus and will appear on your credit report.
Oftentimes, you’re looking at a credit score drop of anywhere from 50 to 100 points.
After 60 Days Of Not Paying
At 60 days, of not making credit card payments, you will likely see even more damaging consequences.
The late fees and interest fees that have been mounting will likely increase over time, further contributing to your current debts and making it even more difficult for you to pay off the total amount.
Additionally, there’s the likelihood that your credit score will continue to drop as more time passes, making it harder to recover when you have the chance to pay it back.
After 90 Days Of Non-Payment
Payments that are 90 days late tend to have the worst possible consequences as your creditor will likely close your account and sell your account to a debt collection agency.
A debt collector is much more likely to pursue legal action in order to settle your account, which may include suing you for the money, placing a lien on your bank account, or even wage garnishment.
Given the fact that the debt has had enough time to build far beyond what you initially owed, the financial repercussions can be major, especially if legal action is pursued.
After 120 Days Of Not Paying And Beyond
As time goes on, the unpaid debt will continue to pose a major threat to your overall credit.
Taking the necessary steps to work out a debt repayment plan before you face legal consequences and other financial issues is key to getting back on track in the face of mounting debt.
Besides the gradual increase of your initial debt as a result of late fees and interest, it’s important to remember that the drop in credit is what will hurt you the most.
With a low credit score, getting approved for loans becomes much more difficult.
If you want to buy a car or a house, you are going to need the cash to purchase in full.
In the event you do get approved for a loan or a credit card, the interest rate is going to be sky high.
In other words, deciding to stop paying your credit cards is going to make your like much harder going forward.
With that being said, that brings us to our next point.
How Do You Make Sure You’re Always Paying On Time?
Now that we better understand what happens if you quit paying your credit cards, a better question to ask is how do I make sure I never make late payments?
If you want to make sure you don’t have to find out what happens if you quit paying your credit cards for yourself, let’s dive into some expert tips for responsible credit usage.
Never Spend More Than You Can Afford To Pay Back
Some people view credit cards as small loans that give them access to money they simply don’t have yet.
When you take this approach, it can be easy to spend money you may not have, which puts you at risk of defaulting on your payments.
Only use your credit card for expenses that you could easily use your debit card for.
This helps you avoid paying more than you have room for in your budget.
Stay Within Your Target Credit Utilization Ratio
Everyone who has a credit card should be using a maximum of 30% of their available credit line.
This will not only help you maintain and build your credit score but ensure that you’re not maxing out your card on a regular basis and putting your credit on the line.
Be Proactive When You Run Into Financial Hardship
Nobody wants to learn what happens if you quit paying your credit cards.
That being said, not everyone may have a choice.
When a financial disaster strikes, some people have to turn to financial tools like credit cards in order to pay for their essentials.
If financial hardship is preventing you from managing your debt effectively, make a phone call to your credit card issuer and work out a repayment plan with them or see if they offer any resources.
You may also find external resources geared towards helping you eliminate your debt.
For example, a nonprofit credit counselor could help you get things under control by working with you to create a debt management plan.
A good resource is the National Foundation For Credit Counseling.
It’s never a bad thing to ask for help, and many credit card companies will work with you as they want to get paid.
With that said, be leery of for-profit debt settlement programs.
Many times these companies encourage you to stop making payments on your credit cards so they can negotiate with your original creditor.
Then they set up a payment plan and their fee is included in this monthly payment.
While it sounds good, you ruin your credit in the process and pay a lot more in fees than if you set up a plan on your own.
Make The Necessary Changes To Prevent Future Problems
Many credit card providers will offer a host of useful tools and features to make sure that you get the most out of your experience.
For example, some providers may allow you to change your payment date so that you don’t experience any issues paying your bills if you get paid later in the month.
You can also take advantage of automatic payments so that you don’t accidentally skip a payment and allow it to continue for weeks at a time.
Finally, you should always return to your budget to make sure you’re only spending what you have in your bank account.
Take Care Of The Underlying Problem
Avoiding major issues like credit card debt and your credit score could be indicative of another problem in your personal life that needs to be handled.
Whether it’s done through self-introspection or with the assistance of a mental health professional, take your time to figure out why you choose avoidance over handling the issue and how you can better manage your finances moving forward.
Once you have better financial habits in place, it’s just about making sure you follow the above advice to avoid figuring out what happens if you quit paying your credit cards.
Make Minimum Monthly Payments
While it is never a good idea to spend more on your credit cards than you can afford to pay back when your credit card statement comes, making monthly payments is better than nothing.
So even if you cannot pay the full balance, pay the minimum instead of not paying anything at all.
While following this plan will increase your overall debt amount, you will at least maintain your credit rating.
The last thing you want to do is learn what happens when you quit paying your credit cards firsthand.
The fees and interest charges are just one piece of the puzzle.
After that comes the bad credit, ruined credit history, the debt collection agencies phone calls and the stress and shame that accompany it.
Work hard to make sure you making payments on time, even if it the minimum amount.
While the ideal financial situation is to pay your credit card balances in full every month, it is better to make the minimum payment than to not make any payment at all.
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I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.