The average American has over $6,000 in credit card debt. And it can turn quickly from a convenience to a burden if you let it get out of hand.
If you’re like many Americans, you might be wondering: What exactly will happen to me if I just stop paying?
Bad things will happen.
Lauralynn Mangis at Advantage CS explains six consequences of abandoning your credit card debt.
Penalties and Higher Rates
The immediate effect of not paying on credit card debt is that the provider will apply late fees and other charges. Along with that, the competitive interest rate that motivated the consumer to open the account will disappear forever. As part of the penalty, the provider is likely to suspend charging privileges until the debtor makes at least the minimum payment due on the account.
Turned Over for Collections
While providers will make reasonable efforts to communicate with debtors and make some sort of payment arrangements, failure to respond will result in the account being closed and turned over to a collection agency. The collection agency will begin to make contact by mail, email, and by phone. This includes attempting to reach the debtor at work. Those communications will continue until the debt is resolved one way or another.
In some cases, the provider or the collection agency will take legal action in an attempt to recover the debt. In this scenario, the debtor will end up having to pay for legal representation, the cost of the judgment, and any court costs that apply. This is a really bad thing to have happen.
Once a credit score is ruined by failure to pay and closed accounts that still have balances, it takes years to recover. Eventually, those negative marks do disappear (it could take 7-10 years), but in the meantime the debtor will find it hard to obtain credit or loans in any form. The best approach is to honor debts, communicate with card providers