Key takeaways
- Missing a payment usually brings a late fee right away, and can bring a higher penalty interest rate.
- Late payments can be reported to the credit bureaus and stay on your report for up to seven years.
- After about six months of missed payments, card companies typically charge off the account. You still owe the debt.
- The debt may go to a collector, and you could be sued.
- Calling your card company before you fall behind gives you more options.
If you can’t afford your credit card payments right now, you are not alone, and you are not out of options. It helps to know exactly what happens if payments stop, so you can decide what to do with a clear head. The most important step today: call your card company before the due date and ask what help it offers.
What happens, step by step
The exact timing depends on your card company and your agreement, but the pattern is usually similar.
Right away: late fees and a possible penalty rate
If you miss the due date, your card company can charge a late fee. Many cards can also raise your interest rate to a higher penalty rate after a late payment, as your card agreement explains. That means your balance can grow faster even though you aren’t using the card.
Around 30 days late: your credit report
Once a payment is 30 days or more late, the card company can report it to the credit bureaus. A late payment can lower your credit score, and the CFPB says most negative information can stay on your report for seven years.
The next few months: calls, letters and a closed account
As more payments are missed, the card company will usually contact you more often. It may close or freeze your card. Fees and interest keep adding up. According to the CFPB, when you stop paying your bills you will usually face late fees, penalty interest and other charges, and creditors will likely step up their collection efforts.
Around six months: charge-off
Under federal banking guidance, credit card accounts are generally charged off at 180 days past due. A charge-off means the card company writes the debt off as a loss on its books. It does not mean you no longer owe it. A charge-off is a serious negative mark on your credit report.
After the charge-off: collections and possibly a lawsuit
The card company may keep trying to collect, hire a collection agency, or sell the debt to a debt buyer. A collector must follow federal rules. Read your rights when a debt collector calls and how to ask a collector to prove a debt.
The card company or a debt buyer may also sue you. If you get court papers, respond by the deadline. If a court rules against you, the creditor may be able to garnish your wages or bank account, depending on your state’s laws.
What to do instead of just stopping
Call your card company first
Many card companies have hardship programs that may lower your payment or interest rate for a while. You have more options before you fall behind than after. Ask what is available, and get the terms in writing.
Protect the essentials
If you truly can’t pay everything, protect your income, housing, utilities and essential insurance first. Our bare-bones budget guide shows how to sort bills.
Talk to a nonprofit credit counselor
A credit counselor can review your budget and may suggest a debt management plan, where you repay what you owe, often at lower interest rates. You can find one through the NFCC.
Understand debt settlement before you consider it
Some debt settlement companies ask you to stop paying your cards on purpose while you save for settlements. That carries every risk on this page. If you consider it, know that results are not guaranteed, fees apply (but never before a debt is settled), stopping payments leads to fees, collection calls, credit damage and possible lawsuits, and forgiven debt may be taxable. Our debt settlement vs. debt consolidation guide compares your options.
Talk to a bankruptcy attorney if the debt is far too big
If there is no realistic way to repay, a free consultation with a bankruptcy attorney can help you understand that option.
What to avoid
- Ignoring calls and letters entirely. You can miss dispute deadlines and court dates.
- Taking out a payday loan to make a card payment. It can make next month worse. See payday loans: costs, risks and safer alternatives.
- Paying anyone upfront to “fix” your debt. The FTC warns that only scammers charge before they settle any of your debts. See signs of a debt relief scam.
The bottom line
Stopping payments doesn’t make credit card debt go away. It usually makes it bigger and harder to deal with. If you’re struggling, call your card company early, protect your essentials, and get free advice from a nonprofit counselor. To see how each path affects your credit, read how debt relief affects your credit score.
Sources: CFPB: what is a debt relief program · CFPB: how long negative information stays on your report · OCC Bulletin 2000-20: retail credit classification · FTC: how to get out of debt