What if you don’t pay your credit card bills?

Posted by R. MAK. 5 September, 2008

These are difficult times for our economy. Each one of us is feeling the pinch due to increased cost of living. It is getting very difficult to make ends meet. In difficult times like this it is very easy to amass a huge credit card debt. It can happen to anyone. Even to people who have been financially responsible. “Can I just don’t pay my credit card bills?” is the question many individual ask themselves and friends. This option is very much there. It also will give you some extra cash for few months ahead. But following are few of major problems you can get yourself into if you stop paying your credit card’s monthly payments.

Collection Calls

This is most scary part of Credit Card Game. Credit Card Companies will constantly call you and demand their money back. Collectors may call you 5 - 7 times a day. They will call you at home, They will call you at work and they will call you on your mobile phone too. There have been some reports that collection agents have been calling bosses, co-workers, and family members (which amounts to harassment and is not legal). They go to any length to get you on phone and when they get you on phone they use a lot of psychological techniques to lure you into giving them checking account numbers and other banking information. They will use every trick to make you pay. One of  the well known methods is that they intimidate and threaten you by telling you that they will take your house, car etc. Or they will bring police to your home. all this can be very stressful on some people. You will also start getting letters in the mail from them that may eventually turn more demanding.

Don’t get intimidated by them, Know your rights and report any violations to police and seek help. Most of the credit cards are unsecured so no one can take your car, house, furniture, etc. Worst thing these credit card companies can do is…  they can really damage your credit score.

Bad Credit Score

If you go 30 days past the due date on any of your credit cards, these credit card companies normally report this to Central Credit Bureaus so these missed payments are likely show up in your credit report and this has a terrible impact on the credit score. Companies, almost all of them will increase their interest rate and future loans may either be refused or available to you at very high costs.

A Bad Credit Score is not good. Anytime you apply for a job, home loan, school loan, car loan, car insurance, They do take a look at your credit score. If you are really in very bad crunch. consider bankruptcy as an option. After some time, usually 7 years, it’s all clean and neat again.

Excessive Interest Rate / Late Fees

Once you start missing your credit card payments, most of the credit card companies start charging “Default Rate”. That is normally highest possible interest rate, about 30%(Check the fine print on your credit card Application form or Disclosure on your Credit Card company’s  web site). They also start charging late fee penalties ranging between $20-60. if your balance exceeds the credit limit, which normally does, there will also be an over-limit fee which would be charged on daily basis.

I would recommend that you contact each of your credit card companies and ask to have your credit card account closed. This action will stop interest from accruing i.e multiplying. They will tell you that they can decrease your interest rate or they can allow you to make a very minimal monthly payment. some even offer a $3 per month payment plans but this is rarely more than a trap. You will only end up throwing money away as you will only be paying the interest payments and a debt will continue to grow. They will eventually close the account themselves anyway. So it is in your best interest that you do it yourself as it will save you some(depending on your balance $100 to $10,000) money at the end. Ask for a final bill from your credit card company and when you receive that then just try to pay a certain amount on each bill if possible but I recommend that  put them aside and concentrate on your mortgage and other liabilities like car payments, children education.

Once you start earning more income, you can either try to pay off the balances of the closed accounts little by little. If you can arrange some extra cash at the end you can also contact each credit card company directly and make them an offer to pay a certain percentage of the balance owed i.e 20% to 50% (think about your offer before you call them). If you choose to do this, stay firm on your offer and document everything. Do not send any payment to them until they send you something in writing that they will mark the account paid in full (keep all documentation and proof of payment).

Most Credit Card companies will accept this because they feel that something is better than nothing. They might also make a counter offer but stay firm and tell them that it’s all you can afford. If they say “No” than don’t worry and say “thank you very much” and move on to the next credit card company. It is  most likely they will call you up to accept the offer.

It is also a very good idea to consolidate your debt on one credit card account and then make minimum payments.

Legal Action

Eventually, if a credit card debt becomes very delinquent, Credit Card companies might take legal action course which can result in liens, garnished wages or any other legal judgements requiring you to pay your debt. However, credit card companies would normally try to avoid this situation because this is a very long, complicated and expensive process. But nevertheless, legal action does happen.

Just to debunk a myth, credit card companies generally do not freeze bank accounts. They would first need to have a court judgement against you. This whole process costs them money and it is rarely done by credit card companies. So, don’t worry, no body can put you behind bar, take away everything from you.. there is always help available. don’t worry.

People who liked this Post also read

You might also be interested in




Link to this article from your site or blog. Just copy and paste following code:

Categories : Credit Cards Tags : , , , , , , ,

Comments
September 5, 2008

I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.

Tim Ramsey

Posted by Tim Ramsey
September 6, 2008

I believe this tips will go a long way to help folks who feel trapped under credit-card debt.

However, the best advise is to have no CREDIT CARD. Be STINGY with your expenditures, and generous with SAVINGS.

If you don’t have it, don’t spend it. Nice post.

Nigerian Entrepreneurs last blog post..Why Do You Blog?

Posted by Nigerian Entrepreneur
September 6, 2008

Good post.

The killer is the late fees and the accumulating interest. The phone calls are a real pain as well. Especially if you’re at work or with friends. And as for your credit rating. It depends how many you’ve missed. But if you go AWOL expect the worse.

Best advice I ever got was to use a credit card as a credit card and pay it off each month. Using it as a lone is not a great idea unless you’ve gone for a 0% balance transfer which can be money management genius.

Talk About Debts last blog post..Poetry Competition - It’s called Debt Free – Poetry to inspire action

Posted by Talk About Debt
September 14, 2008

@Talk about debt.. I have written a new post based on your advice..

R. MAK.s last blog post..A Quick Guide to Credit Card Basics

Posted by R. MAK.
September 15, 2008

I always read your blog in high spirits. Thanks :)

Posted by sondaj
Leave a comment

(required)

(required)