Most Long Island area residents have at least one credit card. In fact, it is estimated that Americans have at least four credit cards. Most of the time a credit card holder is responsible with credit card debt but occasionally an unexpected life event happens, and a person finds himself with way more credit card debt than they can handle. So, what happens if a person doesn’t pay their credit card bill?
The first missed payment
After missing one credit card payment, a credit card owner will receive a late fee which is capped at $27 for the first offense. A credit card interest rate may also go up. Missing a payment can also affect a person’s credit score.
2 to 3 months of missed payments
If a payment is more than 30 days late it will then be reported to the credit bureaus which will affect a person’s credit score. The missed payments can remain on a person’s account for up to 7 years. A credit card issuer will also turn off the card for future purchases. Late fees will also be tacked on for additional missed payments. If a payment is more than 60-days past due, the interest rate may go up to 29.99% for the entire balance. Credit card companies will also begin making frequent phone calls to try and collect payment.
More than 4 months
After missing several months of payments a person’s account will be charged off. This means that a credit card company sold the debt to a collection agency who will now be contacting the credit card owner. When an account is sent to collections it can be detrimental to a credit score. The IRS will also notify a person that they will have to pay taxes on the canceled debt.
If a person is facing a situation in which they are no longer able to pay their credit card debt, they may want to speak with a legal professional who is skilled in bankruptcy. An attorney can help their client with their credit card debt before it gets out of hand and help them make a fresh financial start.
