Should I Default On My Credit Card Debt?
Missing even one payment on your credit card racks on interest charges, late fees and possibly over-the-limit fees. Within 180 days, the amount you originally owed skyrockets, and your account goes into default. People have found their $2,000 in credit debt triple within a year of defaulting.
Interest And Penalties On Defaulted Credit cards
When you sign up for a credit card, you agree to a clause known as Universal Default. This means that missing a payment gives the company the right to increase your interest rate to the maximum, usually 30 percent. In turn, this increases your payment amount every month.
In addition to the default clause, most credit card companies add in clauses regarding late fees and over-the-limit fees. Soon, the amount you owe spirals out of control. You can’t pay the amount due, and because you can’t pay, the company keeps slapping on charges and interest.
Debt Collectors Call To Collect Credit Card Debt
Most companies will hound you for the money for 180 days. Persistent phone calls and demanding letters become the credit card company’s plan of attack. If you ignore this, they switch your account to “Bad Debt” and pass it to a debt collecting firm or lawyers.
The debt collectors or lawyers become more aggressive. If you ignore them, they have the right to take you to court and sue for the money. The judge can then force you to pay what you owe by garnishing your wages.
Credit Cad Default Effects Your Credit Score
After thirty days, the company notifies the credit bureaus of your late payment. Late payments reduce your credit score. The more late payments you have, the worse your score.
The lower your credit score, the higher your interest rate on other loans. You pay more to borrow money because companies fear you may default again.
Once you have defaulted on your credit card, the bureaus are again notified and your credit score plummets.
Applying for accounts, such as cell phones, loans and utilities becomes problematic because most companies look at your credit report before extending service. In addition, many employers even use credit scores when choosing employees.
- What Do Credit Card Companies Do On Default?
- Should I Pay Off My Credit Card After Default?
- What Is The Consequence Of Default On Credit Cards?
- What If You Default On Credit Cards And Loans, But You Are Still Spending On Other Credit Cards?
- What Happens If I Am Not Paying Credit Card Debt?
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