If you don’t pay your balance then credit card companies may proceed in a number of different ways. Primarily, they will charge you a late fee. If you still don’t pay they may report you to their collection department, to credit reporting agencies, or even sue you to get their money.
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Making timely payments on your credit cards is important to maintaining cardholder privileges and a good credit score. This article explains what may happen when cardholders don’t make payments to their card issuer.
What happens if I miss a credit card payment?
If possible, don’t skip even one credit card payment. Make the minimum payment on time, even if doing so causes a temporary financial twinge.
If missing a payment is truly unavoidable, contact the credit card company to discuss your situation. Authors Christian Schoyen and Christin Tellefsen of “A Second Life,” (2009) say it’s possible to ask your credit card company to lower your interest rate. Explaining the reasons for the request—a lost job, a family illness, or business stresses—can help the credit card issuer to help you. Do so in writing to preserve your rights under the Fair Credit Reporting Act (FCRA).
Although facing your financial problems isn’t easy, your credit card issuer knows about the economic issues facing many people. You’re not alone.
The credit card issuer wants to earn a rate of return on the money loaned to you. However, the first goal of the lender is to recover the original capital amount represented by your credit line.
What happens if I miss a credit card payment because I really can’t afford the minimum?
According to the Federal Trade Commission’s report “Choosing A Credit Card: The Deal is in the Disclosures,” reading the fine print of from your credit card helps to avoid sudden, shocking minimum payment increases. For example, accepting a new credit card with an introductory low APR without reading the disclosures (e.g., the APR will increase to a double-digit percentage rate in six months) can cause the cardholder confusion and financial pain. Prepare for higher minimum payments before the APR rate adjustment occurs.
If you do miss a credit card payment, you’ll receive mail from the credit card company. They must notify you in writing in the attempt to collect a debt. Then, expect collection calls. If you’ve previously paid your credit card bill on time each month, collection calls may not start immediately after the missed payment date. To avoid the onslaught of collection calls, contact your credit card issuer to explain why you did not make a monthly payment as agreed.
The credit card company’s collection department may make many attempts to reach you by phone every day. They may call you at work. According to the Fair Credit Act, you may tell the debt collection department to cease telephone contact. You may instruct them to communicate only by U.S. mail. If you choose to prohibit telephone contact, send a letter to the debt collector by U.S.P.S. registered mail. Maintain a file with letters sent to the collector and receipts delivered to you through the postal service. Telling the collector on the phone to stop calling won’t help!
Debt collection activities are the credit card issuer’s attempt to recover capital. Learning how to negotiate with credit card companies, working out a new payment arrangement or lowering the interest charged on your account is likely to benefit your credit in the future. Communicating with your lender helps both parties!
How does failing to pay my credit card affect my credit report?
Card issuers report the status of each outstanding loan serviced by them each month to the three major credit-reporting agencies, Experian, TransUnion, and Equifax. When you don’t make a payment on your credit card (or when you do), the issuer reports this to the major credit reporting agencies. When others request your credit report (necessary for a car loan, apartment rental, or new job), your FICO score reflects creditworthiness.
The impact of not paying a credit card may not immediately damage your credit report. When the credit card issuer determines that your loan is in default, the outstanding balance actually increases. You’re assessed default charges and late charges.
Ultimately, a lower credit score harms future access to credit. New credit will cost more. That’s why paying your credit cards on time, as agreed, and prompt notice of your financial condition to credit card issuers, is important to your financial future. That’s why researching the best cards for your financial preferences makes such good sense.
Take a moment to explore the best credit cards online by requesting information from the credit card chaser now!
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