“What are the consequences of missing credit card payments?” is a question many of us hope to never answer firsthand, because it usually means we’re struggling to stay on top of our bills.
It is absolutely a question worth asking, though, as many borrowers find themselves in the position of missing or skipping payments for any number of reasons: job loss, medical emergency, miscalculations in the budget or simply forgetting to go online and make a manual payment. More than one in five Americans say they’ve made a “delinquent” payment, also known as one that’s more than 30 days late.
Here’s more on what to expect if you miss credit card payments, broken down by the number of billing cycles behind which you may have fallen.
Consequences of 1-2 Missed Payments
The first “strike” on a late credit account is a late fee up to $29. A second “strike” up to $40 will occur if you miss another payment within half a year. If it’s your first time missing a payment, you may be able to get it waived by speaking with your credit card issuer. WalletHub reports almost 90 percent of people were able to do so.
You’ll notice your introductory interest rate will also disappear, and instead purchases will start to accrue a higher penalty APR. Look through the terms and conditions of your exact credit card to figure out the penalty APR on your account — it’s not unusual to see rates jump to 29.99 percent in some cases. The 30-day grace period you once had to charge items without paying interest will also go away.
After 30 days of non-payment, your card issuer can also officially notify credit reporting bureaus your account is delinquent. This is the point at which your credit score will sustain damage, so you’ll want to get it sorted out as soon as possible for the sake of your credit history.
Some credit card companies will wait until you’ve missed two payments to report delinquency; it depends on the circumstances and the company.
Consequences of 3 Missed Payments
Missing three payments means you’ll owe the sum of all your late fees, not to mention all the interest that’s built up as well. It’s more than likely your card issuer will have reported this development to credit reporting firms, so your score will probably plummet even more — and this mark will linger on your history for as long as seven years.
At this point, your card issuer may actually close your account if you’re unable to make minimum payments. This means you’ll be unable to make purchases with the card, plus your credit utilization ratio will shift to reflect the lesser amount of available credit. A higher credit utilization ratio can make you look riskier to lenders, which is why it can have an adverse effect on your credit score.
Consequences of 4+ Missed Payments
Missing more than three payments results in all the aforementioned consequences, plus a charge-off. In other words, your card issuer can sell your account to a debt collection agency because it seems likely your account will otherwise become a loss to them. The sale of your account will go on your credit history, and you’ll probably start getting pesky calls from the new collector eager to motivate you to pay up.
Before resorting to a charge-off, your credit card company may be willing to accept a lesser payment because it’s better than nothing. You can try to negotiate on your own, or work through a debt relief program depending on your circumstances.
Be aware creditors and collectors can take you to court over unpaid debts, where you may face judgements against you in the form of garnished wages or a lien on your assets. The very last resort if you’re absolutely unable to satisfy credit card debts may be filing for bankruptcy.
The consequences of missing credit card payments get increasingly serious as time goes on, so it’s important to address them one way or another as soon as possible — for the sake of your stress level and your credit report.