Consequences of missing one or more credit card payments
After one missed payment, there will be a charge of a late payment fee of up to $40. If subsequent payments within six months are not complete, the charge will be up to $40. The fee keeps compiling to the balance and starts accumulating interest based on the APR. Some card issuers will waive late payment fees for a first violation. There will be interest charged on the purchases for the billing cycle, which is the case whenever a balance is carried it means failing to pay the full amount owed.
So here are the risks when on-time payments are ignored
One missed payment
On the first missed payment, credit card issuers could revoke the initial APR. If a card has a 0% introductory APR period, missing a payment can cause the APR to rise to the post-introductory period rate. After two missed payments, the card issuer can charge a penalty APR, typically between 27.99% and 29.99%. For the increased charge of a penalty APR, the CARD Act requires the issuer to review an account every six months to determine if eligibility for a lower interest rate is available. If the minimum payments for the six months are complete for the card issuer is reviewing, the APR can revert to the original rate.
After a default payment, a credit card issuer can also report an account as errant meaning to have failed to make the minimum payment by the due date to the credit bureaus, which will damage a credit score. Some card issuers may not report an account errant after one missed payment. If you fail to make payments the chances of a report from from card issuer increases. A late payment can cause the interest rate to skyrocket. Although, penalty APRs may revert to the regular APR by meeting specific requirements. In addition, most credit card issuers give a 30-day grace period during which there is no accumulation of interest on the charges as long as there is minimum payment in time. If payment has missed the due date by even a day, there be will forfeit of the grace period and owed interest for the entire 30-day period.
Three missed payments
If the minimum payment for three consecutive cards is due to dates, then the amassed late fees will be more than $100, plus the interest that has accumulated on the balance over the course of that time. If the card issuer has not yet reported to the credit bureaus, it is to be after three missed payments, which will damage the credit score and show up on the credit report for seven years. There is a chance that credit card issuer’s internal collections agency will contact you. This agency might be willing to negotiate an alternative payment plan. Also, they can lower the minimum payment amount. The card issuer can choose to close the account, which will ban a person from making new purchases with the card.
This can affect the utilization rate, and may further damage the credit score.
More than three missed payments
Failing to pay the credit card issuer for more than three consecutive due dates in addition to the late fees, damages a credit score increases the APR and can result in the credit card issuer charging off the account. Meaning the credit card issuer does not believe that the person will pay back the debt in full. The card issuer may sell the debt for less than the amount owed. The collections agency will still authorize to retrieve the full amount. If you sell the debt to a collection agency, then they will report the account as a collection account to the credit bureaus.
Although, debt collection including credit card issues are in control in terms of what they can do to collect on a debt.
What if the never credit card debt is paid?
If the credit card debt is never paid off, then the debt collectors will use whatever legal means they have to collect.
The credit card issuer or a collection agency can decide to file a lawsuit called a judgment. That is against the defaulter to collect the outstanding debt. If there is no response to the judgment, there is a full chance of guaranteed loss of the case. It will result in forced debt repayment. If that happens, the wages could garnish, the bank accounts frozen. A lien put against the house, or any assets taken away from the defaulter. In addition, the card issuer can levy the defaulter for the legal fees as a result of the actions taken. He also has to take that to collect the debt.
In a worst-case scenario, dismissing a court order can result in contempt, which can result in a jail sentence.