What Happens If I Don’t Pay My Credit Card Bill?

Not paying your credit card bill can have serious consequences. Your credit score could take a hit, you may be charged late fees, your interest rate could increase, and you could even be taken to court. Here’s a detailed look at what can happen if you don’t pay your credit card bill and tips on how to avoid or minimize the damage.

Your Credit Score Will Likely Drop

One of the first things that will happen if you don’t pay your credit card bill is your credit score will probably decrease Payment history makes up 35% of your FICO credit score – the most heavily weighted factor So even one late payment can lower your credit score.

How much your score drops will depend on your specific credit situation:

• If you have a high credit score – For example, over 760 – a single late payment may cause your score to drop by as little as 20 to 30 points.

• If you have a low credit score – Your score may drop by 60 to 110 points with just one late payment. This is because you have less cushion before hitting lower score tiers.

• The later the payment, the lower your score – A 30-day late payment won’t impact your score as much as a 90-day late payment. The more severe the delinquency, the more your score will fall.

It’s important to note that a late payment usually won’t show up on your credit report until 30 days past the due date. So if you pay within 30 days, you can likely avoid credit damage.

You’ll Be Charged Late Fees

In addition to credit score impacts, you’ll also face late payment fees if you don’t pay your credit card bill. These fees are typically around $30 for the first late payment and up to $40 for additional late payments within six billing cycles.

Some credit card companies may waive the late fee, especially if it’s your first late payment. But don’t count on fee forgiveness. Be prepared to pay a penalty.

Your Interest Rate Could Increase

Many credit card companies will hit you with a penalty APR if you pay 60 days late or more. This means your regular purchase and balance transfer APR could jump to around 30%.

A penalty APR will stick for at least six months. Some issuers will remove it after six on-time payments. But others will leave it in place indefinitely. Read your card agreement to understand the penalty APR policies.

You May Lose Promotional Financing Offers

If you signed up for a 0% introductory APR on purchases or balance transfers, failing to pay on time could cause you to immediately lose that promotional rate. The penalty APR would then apply to your remaining balance.

This can be extremely costly if you transferred a balance to save on interest charges. Suddenly you’ll go from a 0% rate to an APR of around 30%.

Your Credit Limit Could Be Lowered

To limit risk exposure, your credit card company may lower your credit limit if you start paying late. This can do further damage to your credit utilization ratio and credit scores.

For example, say your limit is lowered from $5,000 to $1,000 but your balance stays at $2,000. Now your utilization has jumped from 40% to 100% even though your spending habits haven’t changed.

Your Account May Be Closed

If your payment is 180 days past due, credit card issuers can charge off your account as a loss. This means they will close your account to future transactions.

While you’re still responsible for paying the amount owed, the creditor has given up on collecting from you. They may sell your debt to a collection agency at this point.

You Could Be Sued

If you continue not paying your credit card bill over an extended period, you may eventually face a lawsuit from the credit card company. If they sue and win a judgment against you, the court can authorize garnishment of your wages or bank accounts.

To avoid ending up in court, be proactive if you’re struggling with debt. Consider credit counseling or meet with a bankruptcy attorney to discuss options. Don’t ignore calls and letters from creditors.

Tips to Avoid Missed Payments

Here are some tips to help avoid late credit card payments and minimize impacts if you do pay late:

• Set up automatic payments – Autopay is the easiest way to avoid late fees. Just be sure your checking account always has enough to cover the minimum payment.

• Pay more than the minimum – This lowers your risk of accruing interest charges you can’t afford. Shooting to pay off your balance each month is ideal.

• Contact your issuer immediately if you’ll be late – Explain the situation. They may grant you a one-time fee waiver or due date extension.

• Pay as soon as possible if late – Every day late hurts your credit further. Pay even a partial amount to show you’re acting in good faith.

• Ask about hardship programs if you can’t pay – Issuers may lower interest rates or waive fees temporarily if you face financial hardship.

• Consider balance transfer cards to pay off debt faster – This can help you avoid falling behind on unaffordable interest fees.

• Prioritize credit card bills over other debt – Late rent or utility payments won’t damage credit scores like late credit card payments.

• Review your credit reports – Payment mistakes happen. Verify creditors are accurately reporting your payment history.

• Dispute any errors with credit bureaus – You have the right to contest inaccurate late payment notations.

• Consider credit counseling if you’re overwhelmed – Non-profit organizations can help negotiate lower interest rates and create debt payoff plans.

The Bottom Line

Failing to pay your credit card bill can damage your credit, lead to expensive penalty fees, and potentially result in legal action. But being proactive can help minimize impacts. Contact your issuer right away if you anticipate issues paying your bill. Explore hardship assistance programs. And get professional help with debt management if you are struggling financially. Addressing payment problems quickly can prevent worse consequences down the road.