If money’s tight, not paying your credit card bill may cross your mind. It could seem like the only option, especially if it’s between that or not paying more important bills, like your rent. Keeping a roof over your head always takes priority over keeping your credit card company happy.
Even though your credit card bill probably isn’t first on the priority list, it’s not something to skip for long, either. A missed payment that you catch up on within a week or two isn’t a huge issue. The card issuer will probably even waive the late fee if you call and ask. But going a month or longer without paying your credit card can have dangerous consequences.
Here’s what can happen, and what you can do if you’re having a hard time making your payment.
1. You’ll get charged late fees and interest
When you miss your credit card payment, your card issue can charge a late fee. The maximum amount is $30 for your first late fee, and $41 for additional late payments within six billing cycles.
So, miss one payment, and it could cost you $30. Miss the next two, and there goes another $82. That’s $112 in fees within a couple of months.
Your card issuer can also charge you interest when you don’t pay off your card’s full statement balance. Most credit cards have hefty interest rates — the most recent average is 21.47%, according to the Federal Reserve. On a $5,000 balance, three months of credit card interest could cost you over $250.
2. The card issuer could raise your rate
Credit cards have high rates to begin with, but they can get even worse. If you get behind on your payments, the card issuer can apply a penalty APR. Card issuers normally do this when a payment is at least 60 days late.
The penalty APR depends on the card, but 29.99% is the typical rate. This could tack on hundreds of dollars in interest charges.
3. Your credit score will fall off a cliff
Many factors go into your credit score, but your payment history is the most important. If you have a high credit score to start, a single late payment can cause it to drop by as much as 110 points.
Here’s the good news: Your payment needs to be at least 30 days late before it can be reported as late on your credit report. If you miss a payment, but get caught up within 30 days, then your credit will be fine.
Once your credit card is at least 30 days past due, that’s when it can drop your credit score. And the longer your card is past due, the more it will damage your credit.
4. That credit card (and your other credit cards) could be closed
Eventually, your card issuer will decide to cut its losses and close your card. How long this takes varies. Card issuers typically wait until your account is at least 90 days past due. Keep in mind that you’re still responsible for the remaining balance, even after your card issuer closes your account.
If you have any other credit cards, those might be canceled, as well. This can happen even if you made all your payments on those cards. If your credit score drops quite a bit, which is what happens when you don’t pay your credit card, your other card issuers will know about it. They may decide to close your cards with them, because you represent a greater risk than before.
5. You may face legal action
When you open a credit card, you agree to pay any debt you incur with it. If you fail to do that, the credit card company may decide to take you to court.
Some card issuers decide to sell the debt to a collection agency, instead of pursuing it themselves. If that happens, debt collectors will start calling you. And if you don’t come to an agreement with them, the collection agency that owns your debt could decide to sue you.
What to do when you can’t pay your credit card bill
Before skipping it, see if there’s any way you can at least make your minimum credit card payment. For example, see if you can cut spending elsewhere or pick up extra hours at work. The minimum payment is usually just 1% to 2% of your balance, and paying it keeps you current on your credit card.
If not, call your card issuer and explain the situation. Ask if it has a hardship program available. It may give you the option of putting a pause on your payments, lowering the minimum payment amount, or reducing the interest rate. It’s in your card issuer’s best interests to have you continue making payments, so there’s a good chance it will work with you to make that happen.
