Consequences of Ignoring Credit Card Debt
The consequences of ignoring credit card debt can be life-changing. It’s easy to rack up a large amount of credit card debt and one might wonder what would happen if they just stopped making payments. Unfortunately, the result may be financially crippling and affect you for years to come.
Credit Score
Your account holders will report missed payments to the credit bureaus. Your credit score will be negatively impacted. The more delinquent your account becomes, the more your score will drop. This will affect your ability to secure credit to finance a car, home, or student loan. It may even affect your ability to rent somewhere to live.
Interest Rate Increase and Late Fees
After a missed payment, your credit holders may increase the interest rate on your account and tack on late fees. These two things will result in your balance increasing quickly, which will also raise the expected minimum monthly payment. Once the cycle of late fees and higher interest rate begins, it creates a financial hole that is extremely hard to dig out of.
Phone Calls
Your creditors may call after a missed payment or two. Once they turn your debt over to a collection agency, the phone calls will be frequent and merciless.
Legal Action
After several missed payments, your credit provider may decide to take legal action. You may receive a court summons in the mail. If the judge issues a judgment against you, your wages may be garnished to pay back your debt.
Bankruptcy
After months of missed payments, you may find the interest rates, late fees, phone calls, and court dates are just too much to handle. Bankruptcy may be your only way out. While bankruptcy will effectively erase much of your debt, the process will be stressful and it will be on your credit report for 10 years.
While it may seem like a good idea to simply stop making payments, the consequences of ignoring credit card debt will have a significant effect on your stress level, your credit score and your finances for a long time.
How about you, Clever Friends, have you ever thought of just ignoring credit card debt?
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