Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
If you don't pay your credit card bill, expect to pay late fees, receive increased interest rates and incur damages to your credit score. If you continue to miss payments, your card can be frozen, your debt could be sold to a collection agency and the collector of your debt could sue you and have your wages garnished.
Consequences of missing one or more credit card payments
After one missed payment, you will be charged a late payment fee up to $40. If you miss subsequent payments within a six-month period, you'll be charged up to $40. This fee is added to your balance and starts accumulating interest based on your APR. Some card issuers will waive late payment fees for your first violation or if you contact them and explain why you failed to make a payment.
You will be charged interest on the purchases for the billing cycle, which is the case whenever you carry a balance – meaning you fail to pay the full amount owed.
Number of missed credit card payments
|One to two|
|More than three|
One missed payment
On your first missed payment, your credit card issuers could revoke your introductory APR. If you have a card that has a 0% introductory APR period, missing a payment could cause your APR to rise to the post-introductory period rate. After two missed payments, your card issuer can charge you a penalty APR, typically between 27.99% and 29.99%.
If you're being charged an increased penalty APR, the CARD Act requires the issuer to review your account every six months to determine if you're eligible for a lower interest rate. If you make at least your minimum payment for the six-month period that your card issuer is reviewing, you can lower your APR back to the original rate.
After a missed payment, your credit card issuer can also report your account as delinquent – meaning you failed to make the minimum payment by your due date – to the credit bureaus, which will damage your credit score. Some card issuers may not report your account delinquent after one missed payment. Delinquency records will stay on your credit report for seven years, according to Equifax. Failing to make payments increases your chances of being reported by the card issuer.
Keep in mind that a late payment can cause your interest rate to skyrocket. However, penalty APRs may be reverted back to the regular APR by meeting specific requirements.
In addition, most credit card issuers give a 30-day grace period during which you don't accumulate interest on your charges as long as you make your minimum payment in time. If you miss your payment due date by even a day, you will forfeit that grace period and owe interest for the entire 30-day period.
Three missed payments
If you do not make the minimum payment for three consecutive card due dates, then you may amass more than $100 in late fees, plus the interest that has accumulated on your balance over the course of that time. If the card issuer has not yet reported you to the credit bureaus, it will likely do so after three missed payments, which will damage your credit score and show up on your credit report for seven years.
You'll likely be contacted by the credit card issuer's internal collections agency.
This agency might be willing to negotiate an alternative payment plan, which could lower your minimum payment amount. Your card issuer can choose to close your account, which would prohibit you from making new purchases with your card. This would affect your utilization rate, and may further damage your credit score.
More than three missed payments
Failing to pay your credit card issuer for more than three consecutive due dates – in addition to the late fees, damage to your credit score and increased APR – can result in your credit card issuer charging off your account. This means your credit card issuer does not believe that you will pay back your debt in full. From here, they sell it at a loss to a debt collector or will settle for less than you owe to get it off their books.
While the card issuer may sell your debt for less than you owe, the collections agency is still entitled to retrieve the full amount.
If your debt is sold to a collection agency, then your account will be reported as a collection account to the credit bureaus. This is damaging to your credit score and appears on your credit report for seven years. These agencies are known for being more aggressive than card issuers when contacting debtors for payments. However, debt collectors – including credit card issuers – are regulated in terms of what they can do to collect on a debt.
If your issuer or debt collector cancels more than $600 of your debt, you'll have to pay taxes on the amount forgiven. In this situation, the IRS requires that debt collectors file a 1099-C form stating that the forgiven debt is reported as taxable income. For example, if you have $10,000 in credit card debt and your card issuer decides to take $8,000 and forgive the rest, then they will file a 1099-C. You'll then receive a notice that you have to report the $2,000 in settled debt as income, which you must then pay taxes on.
What if you never pay your credit card debt?
If you never pay off your credit card debt, then your debt collectors will use whatever legal means they have to collect from you. This usually means taking you to court in order to force you to pay.
Your credit card issuer or a collection agency can decide to file a lawsuit – called a judgment – against you in order to collect the outstanding debt. If a judgment is filed against you, it is best to answer the summons and explore the options you have. If you don’t respond to the judgment, you are nearly guaranteed to lose the case, resulting in forced debt repayment. If that happens, you could have your wages garnished, your bank accounts frozen, a lien put against your house or any assets taken away from you. In addition, you can be charged for the legal fees accrued by the card issuer for any actions that it had to take to collect your debt.
In a worst case scenario, ignoring a court order can result in contempt, which can result in a jail sentence. So it is best to always address these court notices, preferably with legal counsel, before they get out of hand.
If you're ruled against in a judgment, but still have no means to pay back your credit card debt, then you should consider filing for bankruptcy – legally stating that you cannot pay back your debt.
There are two types of bankruptcy that most individuals can file for: Chapter 7 and Chapter 13. Chapter 7 bankruptcy requires a third-party trustee to liquidate your nonexempt assets to pay your debt collectors. The exemptions are decided on a state-by-state basis, but you could lose your house, your car and any valuable personal possessions. Chapter 13 bankruptcy requires you develop a plan to repay your debts within a reasonable timeline – three to five years – and then make payments to a third-party trustee who will pay your debt collectors.
Chapter 13 is only available to individuals who can prove they have a regular income and is preferable to Chapter 7 bankruptcy in most cases, as it allows the person filing for bankruptcy to protect their property.
After a person successfully files for bankruptcy, the debt collectors are forced to stop most collection actions. Bankruptcy appears on your credit score for seven years if you file Chapter 7 bankruptcy, and 10 years if you file Chapter 13 bankruptcy.
What happens to your credit card debt when you die?
If a person with credit card debt dies, their credit card issuer is notified and will stop assessing penalties – such as late fees. Often the debt will transfer to the next responsible party – which could be any co-owners of the account, a spouse or the deceased person's estate. Whether or not debt can be transferred to a spouse depends on whether or not the deceased person lives in a community property state – such as Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
If the debt is transferred to the estate, then it's the responsibility of the executor of the estate to liquidate any assets necessary to pay off the credit card debt. If the estate is worth less than what is owed, then the debt collectors usually have no recourse for collecting on the debt.
What happens to your credit card debt when you move out of the country?
Debt collectors are still entitled to seek payment for your debt even if you leave the country. This means that they can file a lawsuit against you and can go after any assets that you leave behind. The suit also may be able to reach you abroad, depending on the country that you move to. However, it's likely that the collections agency will not try to pursue collecting your debt if the cost of doing so would exceed the amount you owe or the amount they expect to get back.
If you leave the country, your credit card history will not follow you. This means that you'll continue to accrue penalties and damages to your U.S. credit history, but you'll have no credit history with the credit bureaus in your new country. The downside is that you will have to build credit from scratch in your new country of residence. And if you decide to return to the U.S., the repercussions of ignoring your debt will likely still exist.