What Happens If I Stop Paying My Credit Cards?
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What Happens If I Stop Paying My Credit Cards?
Stopping payment on your credit cards can seem like an easy way to get out of debt, but it comes with significant consequences. If you default on your credit card payments, your credit score will take a big hit, and you could end up facing legal action from creditors. However, there are options to manage credit card debt responsibly without simply stopping payment.
Your Credit Score Will Plummet
The first major consequence of not paying your credit cards is damage to your credit score. As soon as you miss a payment, it can show up on your credit report and drag down your credit score by as much as 100 points or more. Multiple missed payments will hurt your score even more. A low credit score makes it harder to qualify for loans, credit cards, apartments, and even jobs. It can take years to rebuild your credit after not paying credit cards.On Reddit, many users share stories about how defaulting on cards destroyed their credit scores for years:
“I defaulted on $5k worth of credit card debt back in 2008-2009. My credit score tanked to below 500 and is just now back over 700.”
“I stopped paying my credit cards five years ago when I lost my job. My credit score dropped from 750 to 450 almost overnight. I’m still working on improving it.”
So before you decide to stop making payments, think about whether destroying your credit is worth getting out of debt now. There are better options, which we’ll get into soon.
You Will Face Collections & Lawsuits
Within a few months of missing payments, your accounts will likely get sent to collections agencies. These agencies will start contacting you demanding payment through phone calls, letters, and lawsuits. Collections accounts also further trash your credit.Debt collection lawsuits are no joke. If the agency wins a judgement against you, they can garnish your wages so the money comes straight out of your paycheck. They may also put liens on your property so if you sell assets like a house or car, the proceeds go to paying the debt. One Redditor shared their painful experience:
“I stopped paying my credit cards two years ago because I was drowning in debt. Now I’m facing a lawsuit from a collection agency demanding $8,000 that has turned into $15,000 with late fees and interest. They are trying to garnish my wages until it’s paid off. I regret not trying to work with the credit card companies.”
Some collection agencies are shady and may harass you with frequent calls or even threats of jail time. While illegal, these tactics can be intimidating. Understand your rights under the Fair Debt Collection Practices Act so you don’t give into manipulation.
Your Interest Rates Will Skyrocket
When you first miss payments, credit card companies will likely hike up your interest rates dramatically – often to 30% or higher. This penalty APR makes the debt grow much faster.For example, say you have a $5,000 balance at a manageable 15% interest rate. If the rate rises to 30%, that debt can balloon to over $7,500 in two years with no additional charges. The higher the balance, the harder it becomes to repay.Seeing interest fees swell every month only makes borrowers feel more hopeless about repayment. But avoiding payments only makes the problem worse.
You Still Owe the Debt
Some borrowers believe that stopping payment makes debt disappear. But even after years of nonpayment, you still legally owe the amount – plus additional late fees and interest. Creditors have a long memory and patience to collect.The statute of limitations defines how long creditors can sue you for repayment. This timeframe ranges from 3 to 10 years depending on your state. Even after the statute of limitations expire, the debt still lurks on your credit report damaging your score. There is no escaping credit card debt.
Your Wages & Bank Accounts May Get Garnished
When creditors win a lawsuit against you for nonpayment, one of their enforcement tools is wage garnishment. This means they can legally collect a portion of each paycheck – often 25% – until the debt clears. Having money taken right out of your check leaves less for essential expenses, which only worsens financial hardship.In addition to garnishing wages, creditors can seize funds from your bank accounts through a process called levy. They can empty checking or savings accounts leaving you without funds to pay bills or buy necessities. You could even have tax refunds taken.This Redditor shares their painful experience with collections:
“I stopped paying three of my credit cards about a year ago because I lost my job. I just had a collection agency win a lawsuit against me for $6,500 and they are taking 25% of my pay plus seized my bank account. I’m barely getting by each month now.”
As you can see, dodging credit card payments through default only works for so long before aggressive collections make life very difficult.
You Lose Card Benefits & Rewards
One other penalty for not paying credit cards is losing out on valuable benefits and rewards you may have earned. For example, if you have travel rewards cards, you forfeit all those hard-earned airline miles or hotel points. Any cash back earned also disappears.Additionally, your accounts get closed so you can no longer tap helpful perks like rental car insurance, extended warranties, or purchase protection. These card features have real monetary value, so not paying has additional hidden costs.
What Are Your Options If You Can’t Pay?
If you have credit card debt you realistically cannot pay each month, there are still better options than dodging it entirely. Here are a few to consider:Apply for hardship programs: Most credit card companies understand financial struggles, especially after job loss or illness. Call their hardship department to explain your situation and request reduced payments, waived fees, or temporary 0% APR (though interest continues accruing). This requires good faith effort to pay something each month.Consolidate with a lower rate: Balance transfer cards offer 0% interest for 12-18 months so more payments go towards principal. You can also take a lower-rate debt consolidation loan to reduce interest fees. This makes balances more manageable.Settle for less: After debts get sold to collections agencies, they may accept 40-60% of the balance as payment in full to get it off their books. The catch is this may still show as a negative item on your credit report.Declare bankruptcy: As a last resort, filing Chapter 7 or 13 bankruptcy gets most debts discharged in exchange for assets. However it devastates credit scores for 7-10 years.The best approach depends on your specific situation. Talk to a nonprofit credit counseling agency to go over all your options. The important thing is taking action – because sticking your head in the sand and ignoring debts only creates more suffering. And continuing minimum payments, even if small, shows good faith effort.With some time and commitment, you can bounce back from credit card debt without tanking your financial life in the process. It pays to understand the smart ways to approach repayment before debts spiral out of control.