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What are the consequences of defaulting on credit cards?

defaulting on credit cardsThe consequences of defaulting on credit cards often involve a series of actions, none of which are particularly attractive. Rather than choosing default, a more promising option may be working out a payment plan with your creditors. You can also opt for a debt consolidation by moving your debt to a balance transfer credit card that doubles as a low interest credit card to make it more convenient and easy to pay.

Use our FREE credit card finder to find many choice balance transfer credit cards or low interest credit cards now!

Although moving your debt does not absolve it, it does free you from the risk of facing credit card default consequences. Simply ignoring your debts won’t make them go away, either, and can instead spiral them even more out of control until they potentially result in legal action against you.

What’s the first thing that happens if you default?

Stage one of the default can include incessant reminders from your credit card company that your account has become past due. These reminders may be eventually accompanied by late payment fees and even a higher interest rate, according to the California Department of Consumer Affairs, or CDCA.

Your credit card agreement should outline both penalties, and some have late payment penalty fees that can reach as high as $39 or above. Your interest rate may be subject to an increase if your credit card agreement has a universal default clause, the CDCA notes.

A universal default clause may allow the credit card company to change your interest rates at any time for any reason.

Even if you default on a debt other than the one you owe to your credit card company, the credit card company may still have the power to raise your credit card interest rates. Its thinking may be if you defaulted on one debt, you are more likely to default on another and thus deserve a higher rate to help ensure you’ll pay on time.

Once late payment penalty fees begin to pile up and your credit card interest rates are raised, you debt can quickly grow to astronomical heights that are far beyond what you initially owed. The cycle may continue until either you pay off the debt in full, work with your credit card company to resolve it, or the credit card company takes the next typical step in a default.

Credit Card Debt Debt Goal Debt Consolidation Care

What is the next step for defaulting on credit cards?

defaulting on credit cardsIf the credit card company no longer wants to be bothered hassling you for the money you owe, it may turn your account over to a collection agency. Collection agencies exist for the sole purpose of collecting past due debt, which means they have all the time they need to try to get you to pay.

Although debt collectors are allowed to contact you concerning your debt, they are not allowed to harass you. Incessantly calling or calling at inconvenient times are not allowed, nor is talking to anyone else about your debt other than yourself, your lawyer, or your spouse, the Federal Trade Commission explains.

You have the right to request the debt collection agency stop contacting you, as long as you write them a letter and retain proof the letter was received. Even if the agency stops calling you, however, that still does not mean your debt is erased. The agency is also allowed to contact you one more time for one of three reasons to tell you it:

  • Is forgiving your debt
  • Will no longer contact you
  • Is taking action against you

What type of action can be taken against me?

If you continue to ignore your debt, you may find yourself in court. Collection agencies or any debt collector can file a lawsuit against you for the money they say you owe. The FTC says the best move if you receive official paperwork regarding a lawsuit, is to respond to that paperwork by the due date so you retain your rights.

You may respond to a lawsuit personally or hire a lawyer and you may eventually have to battle the debt in court.

If you win the battle, your debt may be forgiven. If you lose the lawsuit, the court has a power to garnish your wages to pay back the debt. Although you do have one year to file a countersuit against the lawsuit, it may still be less of a hassle to deal with the debt before it possibly gets to these final stages. Consolidating your credit card debt is one method that may be helpful, and that method may work with the right credit card.

Use our FREE credit card chaser to find a low interest credit card or balance transfer credit card to help consolidate your debt today!

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Disclaimer: This content is not provided or commissioned by American Express, Visa, MasterCard, Discover, or any other credit card company or issuer. The opinions expressed here are the author's alone, not those of any credit card company or issuer, and have not been reviewed, approved or otherwise endorsed by any credit card company or issuer. Credit Card Chaser may be compensated through various affiliate programs with advertisers. As always, Credit Card Chaser is an independent website commmitted to helping people research credit card offers and find the best credit card!

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