It can be so tempting to try and run away from your financial woes when you find you can no longer maintain your credit card payments. In reality, running away on exacerbates the problems and leaves you in worse financial shape than when the trouble first started. Not matter what state your finances are in at this time, as soon as you realize you can not honor your obligations towards your credit card bills you need to contact your creditors and work towards a plan for debt relief otherwise you are going to experience a lot of frustration as creditors try to collect on the debts you owe.
What happens when you stop paying your credit card bills? Well, there are several steps a credit card company will take when you stop paying. Here is a rundown of what to expect:
The Direct Contact
Creditors will likely start with repeated letters mailed to warn you of impending action against you for non-payment. In addition to the letters, the phone calls to your home will also start and increase in frequency if you continue to not contact your creditors. These phone calls will not only increase in volume but will also likely occur at work and to other family members homes. As time passes, the creditors will likely become less willing to have a polite conversation once they do get you on the phone. If you continue to ignore the correspondence, your account could be turned over to collections whose calls are often notoriously obsessive and harassing. The calls will not end until further action against you is declared.
Drop In Credit Score
As you begin to accumulate missed payments, your credit score will begin to show signs of damage. The creditor will begin reporting all missed payments to the credit reporting agencies, resulting in a drastic drop in your credit rating, ceasing only when payment is made in full on the balance.
Excessive Fees Incurred
For every missed payment, you will continue to incur late fees, interest charges, and possibly even more expensive penalty fees in addition to the balance you still owe. Expect your current APR to jump drastically in a short period of time and once your balance owed goes over your credit limit, look out for the additional fees getting tacked on to each new month.
When all else fails and your credit card account is delinquent, you can expect that your creditor will file a lawsuit against you or take other legal action. Your wages could be garnished or you may find yourself with a court date. Either scenario will likely cost you a whole lot more than settling your debts at the beginning of the financial crisis would have. While there are some creditors who opt not to sue because of the time and expense, many still will and then you will likely not only be responsible for your original debt, all the incurred fees, and late payments but you’ll have to fork out court costs and attorney fees.
Overall, credit card debt is a common occurrence and one that creditors will likely want to work with you to resolve before advanced action is taken. Point blank, creditors want the money you owe them and will do a lot of follow up to ensure they get their cash. Remember: to avoid this problem in the future, use your credit wisely and only charge what you can afford to pay off each and every month. Resist the urge to carry a balance from month to month and make your credit cards work for you.