It isn’t a secret that when you have some savings and when you are successful in businesses, you feel secured and confident in tomorrow. It happens because money gives us feeling of immunity and even omnipotence. But on the other hand what happens if we lose all our savings and money we earn? It is crash and terror! And now you have to incur a debt, limit yourself in everything… and what will happen in future?
How often do you use your credit card? Or should I ask how often do you use cash? Because using credit card became habitual part of our lives. We use it when buying something in the store or if we need to pay for medical or other services. Also we make purchases online. There are no doubts that using card is very convenient method of payment. Problems appear when borrower loses control of expenditure and can’t close credit “hole”. There are many reasons according to which you can’t pay your bills any more. It can be loss of job or your family income can decrease and you make minimum payments and spend money from credit card for living. And at this moment you can get to bad circle when you borrow money in one place to cover minimum payments in an other. Situation is terrible and it is very important to know what fallows next. Let’s investigate, what happens to those who stop paying by credit card.
What happens to those who stop paying by credit card.
Credit Card debt is a consumer debt that arises when customer stops paying his bills. If you buy items using your credit card and don’t pay off this sum to credit card company in time, you get a debt that will increase with every following purchase and with interest and penalties that you have to pay. As a result you will have to pay additional charges for late payment and credit card company can report to a credit rating agency, that will influence on your bad credit rating in future.
So, when you have credit card debt following things will happen:
- Collection Calls
- Credit Card Cancellation
- Collection Agents on your Door
- Increased Interest Rates
- Bad Credit Score
- Legal Action
- Bankruptcy
Snow ball
Most credit cards have preferential repayment period, during this period minimal extra percentage is charged for using of money owed. After its termination you will have to pay usual credit rate (it depends on the bank or credit card company you deal with).
Every bank has its own rules how to offset your debt by credit card. Some ask you to pay off whole sum that you withdrew during the month. Others ask you to pay 5-10% form basic sum of debt and monthly payments. The rest of the sum you can clear off at the end of term. It is important to show your bank that you remember about your credit.
If it is time to pay off money, but you don’t have them, you will get punitive measures. As a rule it is a raise of landing rate and penalty. Of course measures may wary from company to company.
Next Step
The next bank’s reaction is to block your access to credit card. How soon it will happen depends on bank’s policy. Some financial institutions block your card in the day of default. Others give you some time – from several days to month.
In this period customer is “attacked” by phone calls and letters. It is like notice. Executives will explain you situation and punitive measures. Also they will ask you to promise that you will pay back your debt. If you didn’t manage to do this, you will be offered different ways of clearing off and refinancing.
If these means didn’t help collection agencies start working with you.
Collection agency and legal actions
Collector agency can work on behalf of credit card company, bank or other lender or it can “buy” your debt and you will have to pay off money to the agency. They use different methods to get money back soft, hard and legal. The first one means phone calls and advices. The second one – personal contact (they can visit you at your house, at work or to invite you to their office). And the last one is low suite. If the creditor wins a judgment they will be able to garnish your salary (up to 50% every month); seize personal property such as cars, boats or jewelry; or they can place a lien on your bank account. In some states collection agencies may even seize your home. Also you can be forced to leave your home and it will be sold to cover your debt.
Of course you can hide from collectors and hope that in a couple years bank will mark your debt as bad dept. but you should understand that card holder gets to “black list” of unreliable borrowers forever. It means you will have very bad credit score and credit history that minimize your chances to get another loan in future.
Who can help
Having debts is terrible situation, but if you got in it, you shouldn’t become disheartened. There are companies that can consult you on debt questions. It is always useful to deal with person who understands what is happening and want results of your actions can be. You need professional to realize all problems and find way out. The choice of companies that offer such services is wide. As an example I can name CreditCardDebtNegotiations. They will offer you free consultation and free help. They will provide you with right strategy how to reduce your credit debt.
Some credit card debt statistics
· Average credit card debt of the family is about $15,700. And every card holder has average debt of $5,100
· According to US census bureau in 2010 credit card debt of
· According to Consumer Reports survey:
“ - 54% of Americans pay their balance in full each month
- 33% carry balances up to $10,000 (median balance: $2,254)
- 13% carry balances over $10,000 (median balance: $17,366)
- 21% of consumers said they were treated unfairly by card companies
- 45% of survey respondents say they are charging less
- 11% are charging more than they did a year ago”
Result
Practice shows that it is possible do not pay small credit card debt. And bankers rarely bring an action in such cases. But this debt will spoil your credit history forever.
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