If you do not pay your credit cards, the card company has a legal right to collect the funds in one way or another. In using a credit card, you are essentially making an agreement with the credit card company that you will be responsible for paying the bill. If for some reason you stop paying anything, the credit card company will come after you.
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Not paying your credit cards has multiple consequences. You will be bombarded by letters and calls, you may be brought to court, and your credit score will take a hit, which will negatively affect many things in the future.
Initial Steps a Credit Card Company Will Take
If you don’t pay your credit card bill, the credit card company will make contact with you after 30 days. Most companies will send you a letter and/or call you to inform you that your credit card bill has not been paid and to contact them.
If you do not communicate with your credit card company, their communication will become more aggressive. They will continue to send letters and call you, sometimes at all hours of the day.
If you do not get in touch with the credit card company to figure out an alternate way to pay, the company will more than likely take actions that are more serious.
Next Move a Credit Card Company Will Make
After 180 days, the credit card company will make one of two decisions. It may choose to sue you to collect what it is owed or it may sell your debt to a collection agency. A collection agency will usually harass you with phone calls to collect their money. Some collection agencies will choose to sue you as well.
Consequences of Not Paying Your Credit Card
There are a number of consequences if you choose not to pay your bill. One is financial. When you don’t pay your bill, the credit card company continues to add interest charges, late fees, and other penalty fees to your bill. If you end up paying it, you will pay a lot more than originally.
If you are sued and brought to court, you will also be responsible for legal fees. If the court decides in favor of the credit card company or collection agency, your wages may be garnished. Your credit card company can garnish the money owed directly from your bank account, or your wages can be taken from your paycheck.
Finally, not paying your credit cards will affect your credit score. Your credit history is important for a number of things such as insurance rates, applying for another credit card, being approved for a home, auto, or personal loan, and even for renting an apartment.
Each month that you leave your cards unpaid your credit score decreases. The additional fees that are added to your account will lower your credit and debt ratio, which further lowers your score. According to MyFico, there are ways to increase your credit score, but it takes time and a lot of dedication.
Alternatives to Not Paying Your Credit Card
For most people, the reason for not paying their credit card bills is the lack of funds. The reason for lacking money can vary. You may not be making enough income to pay your bills, or you may be spending too much money on other things and don’t have enough left over.
If you make enough money but can’t seem to make ends meet every month, it is time to analyze your budget. Take a period of a month and keep track of everything you spend money on, such as bills, necessities, food, and entertainment.
Figure out what you can cut back on so that you can use that money for your credit card bill.
If you do not make enough money and are not able to find a different or additional job, you may need to take extreme steps to take care of your credit card debt. You may need to meet with a credit counselor who works for a nonprofit company to discuss your options. Speaking with an attorney who deals with bankruptcy may end up being a choice as well.
For more tips on how to pay down your credit card debt, visit SmartMoney.
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