When you stop paying payments on your credit card, your financial situation immediately begins to deteriorate. You could feel relieved when you don't have to come up with your payments every month, and you might mistakenly assume there are no penalties, but the issuer of your credit card will immediately take action on your missing payments. The consequences of missing payments are negligible initially, but they will become more severe as time goes on.

Late Fees and Interest Accumulate

Late penalties are assessed to your credit card account if you go more than a certain amount of time without paying your credit card bills. In addition, your minimum payment due each month will rise since you will need to catch up on the payments you've skipped and pay the late charge. Your interest rate will be increased to the higher penalty rate if your account gets 60 days past due, equivalent to missing two payments. This is the most devastating consequence. As more and more late-payment costs are charged to your debt, it is only natural that your minimum payment will increase every month.

A Lasting Effect

Even after you have brought your account current, the penalty rate will continue to apply until you have made six payments in a row without being late. After that point, the interest rate that applies to your current amount must decrease, but the penalty rate may continue to apply to any new purchases you make.

Collection Efforts Increase

The billing department of your credit card business will start to contact you to remind you of your credit card payments. These reminders may come from phone calls, letters, emails, or even text messages. Unfortunately, you cannot halt phone calls from your credit card company in the same way you can with a collection agency. The Fair Debt Collection Practices Act allows you to submit a formal "cease" letter to a debt collector if you want them to stop calling you about a debt. In the letter, you should state that you do not want to be contacted anymore. On the other hand, the legislation does not apply to your first creditor in the same way.

Calls from your creditor come less often when you are just a few days or weeks behind on your payments than when you are more behind. In this particular scenario, they are friendly nudges to bringing your account up to date. On the other hand, the more behind you fall in your work, the more often you'll be approached about it. In addition, the tone of the payment reminders becomes sterner, and they begin to discuss more severe acts such as charge-offs and defaults. Your creditor may ultimately make you a settlement offer, which will absolve you of responsibility for the debt owed in exchange for a one-time payment of a predetermined proportion of the total amount still owed on the account.

The Influence of Credit Reports and Credit Scores

Negative information will be posted to your credit report as soon as you are 30, 60, 90, 120, or 180 days late with your payments. Your credit score will suffer directly from these overdue payments, which will make it more difficult for you to get a new credit card or loan in the future. Your insurance premium can go up directly because of your overdue credit card payments. Even if you are no longer responsible for paying the debt, a major black mark will be placed on your credit report. This mark will remain on your record for the following seven years, indicating to everyone that you have previously been delinquent on a credit commitment.

There is a Chance That A Collection Agency Will collect your Debt

Accounts marked as charged off are typically sent to a collection agency. From then, they are passed on from one collection agency to another until they are paid off, at which point they are removed from the system. Your initial creditor, or a third-party debt collector on their behalf, has the legal right to prosecute you for the debt until it is either paid in full or resolved via the bankruptcy process. The statute of limitations may be able to shield you from a court judgment once a specific period has passed; however, the account in question must have been fully dormant for several years, and the burden of evidence will be on you.