What Happens If You Don’t Pay a Credit Card Bill?

Not paying a credit card bill can initiate a series of escalating financial consequences, impacting various aspects of an individual’s financial standing. A missed payment occurs when the minimum amount due on a credit card statement is not paid by the due date, or when only a partial payment is made. This oversight can lead to significant repercussions for a cardholder’s financial health.

Initial Financial Penalties

When a credit card payment is missed, the card issuer typically imposes immediate financial penalties. A late fee is a common charge applied to the account shortly after the due date passes. These fees can range from approximately $30 for a first offense to around $41 for subsequent late payments within a six-month period. This charge is added to the outstanding balance, meaning interest will accrue on the original balance plus the fee.

Beyond late fees, a missed payment can trigger an increase in the Annual Percentage Rate (APR) to a penalty APR. This elevated interest rate, which can be as high as 29.99%, applies to the outstanding balance and new purchases, leading to higher interest charges. Cardholders with promotional interest rates, such as 0% APR offers, may lose these favorable terms after a single missed payment. The original, higher interest rate then applies to the entire balance, accelerating debt growth.

Credit Score Implications

Missing credit card payments significantly impacts an individual’s credit score. Payment history is the most influential factor in credit scoring models, accounting for approximately 35% to 40% of a FICO Score or VantageScore. A single late payment can cause a notable decrease in a credit score, potentially by 80 points or more for individuals with excellent credit.

Credit card issuers typically report missed payments to the major credit bureaus (Experian, Equifax, and TransUnion) once an account is 30 days past its due date. If the payment remains overdue, additional negative marks are reported at 60, 90, and 120 days, further reducing the score. These negative marks can remain on a credit report for up to seven years, making it more challenging to obtain new credit, favorable interest rates, or even rent an apartment or obtain certain types of insurance.

Creditor Collection Efforts

Following a missed payment, the original credit card company initiates various efforts to collect the outstanding debt. This begins with automated reminders (emails, phone calls, and letters) urging the cardholder to bring the account current. These communications aim to prompt payment and inform the cardholder of the growing balance due to late fees and interest.

As the delinquency continues, the creditor’s internal collections department may increase their contact attempts. They might offer to discuss payment arrangements or enroll the cardholder in a hardship program. Hardship programs are temporary arrangements designed to provide relief by potentially reducing monthly payments, lowering interest rates, or waiving certain fees for a set period. These programs are offered to individuals facing genuine financial difficulties, such as job loss, medical emergencies, or unexpected expenses, and require the cardholder to proactively reach out.

Account Charge-Off and Debt Sale

If payments remain consistently unpaid (typically after 120 to 180 days), the credit card company will “charge off” the account. A charge-off is an accounting action where the creditor writes off the debt as a loss, but it does not mean the debt is forgiven. The account is usually closed at this point, and the charge-off is recorded on the individual’s credit report, further damaging their credit score.

Once an account is charged off, the original creditor often sells the debt to a third-party debt collection agency for a fraction of the amount owed. This sale transfers ownership of the debt, meaning the individual now owes the new entity, not the original credit card company. The debt collection agency then has the legal right to pursue payment, initiating new collection attempts through calls, letters, and other communications. These agencies purchase debts at a low cost, allowing them to profit even if they collect only a portion of the original balance.

Potential Legal Action

Failure to pay a credit card debt can eventually lead to legal action by either the original creditor or the debt collection agency that purchased the debt. While typically a last resort due to costs, a lawsuit might be filed, especially for larger balances, after extended periods of delinquency (often six months or more). The legal process begins with the filing of a complaint in civil court and the issuance of a summons to the individual.

If a court judgment is obtained against the individual, the creditor gains additional enforcement powers to collect the debt. This can include wage garnishment, where a portion of earnings is withheld from paychecks and sent to the creditor. Additionally, a judgment can lead to bank account levies, allowing funds to be frozen and withdrawn. In some cases, a lien may be placed on real property, such as a home, giving the creditor a claim against the asset. This could complicate selling or refinancing the property until the debt is satisfied.