What Happens If I Can't Pay My Credit Card Bill
There’s nothing scarier than getting hit with a bill so high you don’t think you can pay it. I’ve had this experience multiple times over the past couple months, and I hate that feeling it generates: like the floor just dropped out from under you and your stomach dropped with it.
It happened earlier this year when the IRS sent me a statement saying I owed $10,000 in taxes. That was not a bill I was prepared to pay at the time, and thankfully it was a mistake on their end. Whew!
But it happened again when I got hit with a $5,000 vet bill - and right after, a $1,500 charge for a car repair. I could not pay these bills out of my monthly cash flow, and had to dip into my emergency fund to cover the unexpected expenses.
While I’ve yet to get a credit card statement in the mail I couldn’t pay, I have forgotten to pay my bill from time to time. Whether you can pay and just forget or you truly don’t have the cash on hand to pay your minimum due, there are consequences to leaving your bill unpaid.
The Consequences of Failing to Pay Your Credit Card Bill
Ignoring your credit card bill or telling yourself you’ll pay it some other time isn’t a smart strategy. Each statement comes with a due date. Failing to pay by that date results in a late fee.
This charge is particularly frustrating to pay because it’s completely unnecessary. I’ve had to pay it more than once. I signed up for paperless billing, so the responsibility is on me to keep track of my due date - because nothing arrives in the mail to remind me.
But life gets busy and I get distracted. The end result is me forgetting to pay my balance and getting hit with a late fee. These are usually capped at $25, but credit card issuers can’t charge a late fee that’s greater than the balance you owe.
A late fee every now and then when you don’t pay your credit card bill is annoying, but not the end of the world. However, many credit cards also increase your interest rate if you pay late. This is called a penalty APR. While you can always ask to get a late fee removed, it's not so easy to get your credit card issuer to go back to your old rate. What's worse, if you continue to not pay your bill, this is only the beginning of the consequences.
The trouble really starts when you simply can’t pay your bill, regardless of when you remember it’s due. Going more than 30 days without paying can result in a damaged credit score. You’re considered delinquent and that gets reported to the credit bureaus who calculate your score.
Go 60 or 90 days without paying your credit card bill and you may start receiving letters and phone calls from your credit card company. Eventually, the company will write off your debt - and while that might sound like they’re just forgetting about it and moving on, that’s not at all the case.
This is known as a charge-off, and it appears as a black mark on your credit report. The IRS could even collect taxes from you on the written off debt, costing you even more.
If you’ve reached this point, things are bad enough. But they can get worse if you still can’t pay.
After a charge-off, creditors can sell your debt to collectors. A collections account in your name generates yet another black mark on your credit report. Or the creditor can pursue legal action known as a judgment to try and force you to pay your debt. And yes, you guessed it: that’s another strike against your credit.
What Happens If You Can’t Pay This Month
Clearly, the consequences go from annoying to unfortunate to flat-out big trouble the longer you go without paying your credit card bill. But sometimes life just happens and you may find yourself unable to pay your credit card bill this month.
What happens then? What should you do?
If you know you can’t pay what you owe, call your credit card company and let them know as soon as possible. Explain why you can’t pay and tell them when you’ll be able to take care of your bill.
You also want to make it clear that this is the first time you haven’t been able to pay (if that’s the case). If you have an otherwise good history of making payments on your credit card, they’ll likely be more willing to work with you.
Then, make a request and keep it friendly and polite. Ask if they can change your due date for this month and drop the late fee. If they say yes, thank them - and then make that payment by the new deadline!
If that doesn’t work, not paying this month will likely result in a late fee. Also, your credit score may suffer since it measures how consistent you are with making payments on lines of credit.
How Do Things Change If You Can’t Pay Over a Longer Period of Time?
If you can’t pay this month, or next month, or the month after that, things get a little more complicated. You rack up more late fees and start carrying a larger and larger balance on your credit card.
Interest starts accruing, which means now you owe even more than you originally charged to the card and didn’t pay off. You move into delinquency and can start getting notices by mail and phone that warn you of additional consequences should you not pay your bill immediately.
At this point, you can still work to negotiate with your credit card company. You may get fees reduced or removed if you can explain your circumstances and ask nicely.
But continued failure to pay eliminates those options after about 90 days, especially when your debt gets written off by the company and sold to collectors. You still have all the late fees and the damage done to your credit score - plus the debt itself - if you can’t pay your credit card bill for 6 months or more.
On top of that, you’ll likely deal with debt collectors that are far more aggressive than your credit card company. It gets a lot harder at this point to negotiate when debt collectors come into the picture.
There’s no way around it: this is a bad financial situation. It can lead to legal actions and stressful, frightening tactics by collections agencies to convince you to pay your debt. That's why you should do everything in your power to avoid not paying your credit card bill for 90 days or more.
Your Action Plan for When You Can’t Pay Your Credit Card Bill
If you can’t pay, you may wonder what is in your power to do. After all, you know the consequences now and if you have the money you want to pay your bill!
But often, the problem is not that you just don’t want to pay. You can’t pay, and that’s a scary situation to be in.
Before you panic, know that you can take action to improve your situation (or prevent it from getting any worse):
- Stop using your credit card. Don’t add more charges to the account if you can’t pay off the existing transactions.
- Call your credit card company immediately. Ask if they can work with you or provide any options that make it so you can more easily pay your bills.
- Look for ways to drop expenses or cut costs immediately to free up room in your budget to cover your bill.
- Get creative and find short-term solutions to get you out of this present financial bind. Can you sell any items you no longer need to come up with the cash to pay your bill? Can you work a few extra hours, either at work or doing odd jobs in your neighborhood?
Don’t be afraid to do a little digging and research solutions on your own too. There are plenty of smart ideas and creative solutions shared across lots of online resources, from blogs to consumer protection sites.
How to Prevent This from Happening Again
The best action is always preventative action. You want to prevent a situation where you can’t pay your credit card bill from even occurring.
To do so, take a moment to evaluate your spending. Are you spending too much on discretionary purchases - in other words, things that you want but don’t need? Can you cut back on little luxuries and splurges to make sure your income can cover your monthly expenses?
Create a budget and use it religiously. Stick to it and don’t spend more than you can afford to repay when your credit card bill comes.
If the problem is that your income just can’t cover all your expenses, it’s time to look at how you can cut the extra costs from your budget. You may need to get frugal and make some sacrifices in order to fit everything in.
I get it: going frugal sucks. But it may be necessary until you can take the next step, which is boosting your income.
Saving is effective, but there are only so many expenses you can cut. Increasing your earnings allows you to cover the costs you need to pay for to live comfortably. You can negotiate a raise at work, consider a new and better-paying position, or look at side gigs and part-time work to add to the money you bring home from a day job.
Taking action and being proactive with your finances are the best solutions out there. If you’re willing to do the work, that will go a long way toward helping you avoid a situation where you can’t pay your credit card bill in the future.