Here's What Happens If You Never Pay Your Credit Card Bill (2024)

It's definitely not something you should test out yourself.

When you get a credit card, you're responsible for repaying the balance. Credit card companies require you to check a box agreeing to this during the application process. You don't need to pay the full balance all at once, but card issuers do require that you at least make minimum payments by the due date.

But what would happen if you decided to never pay your credit card bill? There are several consequences to this, and they get worse the longer you go without paying.

A late fee is the only initial penalty

Once you miss a credit card payment, the card issuer can charge you a late fee. You'll likely see this charge the day after your payment due date. Late fee amounts are capped by the Consumer Financial Protection Bureau (CFPB). By law, credit card companies can only charge up to $30 for a cardholder's first late payment and up to $41 for a subsequent late payment within six billing cycles.

If you don't pay your credit card balance in full by the due date, the card issuer can also start charging you interest. That's why it's recommended to pay your balance in full every month.

There normally aren't any other penalties for the first month. Also, most card issuers will waive your first late fee with them if you call and ask.

Some people worry that their credit score will suffer as soon as they're late on a payment. It actually doesn't work like this. A creditor can only report your account as past due when it's at least 30 days late. If you make your credit card payment 29 days after the due date, it would still be considered on time on your credit history.

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After 30 days, the consequences pile up

Once your credit card payment is 30 days past due, that's when the consequences get significantly worse. Here's what will likely happen:

You'll keep incurring more credit card interest and late fees. Interest charges will continue accumulating as long as you don't pay your card balance. Also, the card issuer could charge you the initial late fee of up to $30, then additional late fees of up to $41 every subsequent time you miss your payment due date.
At 30 days, your credit score will drop due to being late on your payment. Your card issuer can report your account as past due at this point, and even a single late payment can cause your credit score to drop by up to 110 points. Your credit score will decrease again your account is 60 and 90 days past-due.
At 60 days, the card issuer can legally apply a penalty APR to your account. A penalty APR is a higher rate on both your current balance and future charges.

During this time, your card issuer will contact you by phone, email, or letter reminding you that your account is delinquent. These notifications will let you know about further consequences if you don't make a payment.

Your credit card account will be closed and sent to collections

Eventually, the card issuer will charge off your account. That means it will close your credit card, write it off as a loss, and send the debt to collections. The card issuer may have its own internal collection agency, or it may sell the debt to a separate collection agency.

The charge-off gets reported on your credit history, which does even more damage to your credit score. You can also expect debt collectors to start contacting you and trying to get you to pay up. At this point, it's wise to learn about dealing with collections so you know your rights.

When will this happen? That depends on the card issuer. It's typically when your credit card is between 120 and 180 days past due, according to Equifax. However, there are no guarantees. It could happen sooner. It could also theoretically happen after more than 180 days, but that's highly unlikely.

You could be sued

Your credit card company can sue you for unpaid credit card debt. This would normally happen after your account is 180 days past due. Or, if the card issuer sells your debt to a collection agency, the collection agency could file a lawsuit against you. It may do so if it's unable to recover the debt from you.

Unpaid credit card debt doesn't always result in a lawsuit. It depends on the card issuer or debt collection agency and the amount you owe. A credit card company is going to fight harder for $20,000 in debt than for $200. If you lose a lawsuit, your wages can be garnished, and liens could be put on property you own.

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As an expert in personal finance and credit management, I can attest to the critical importance of understanding the consequences of neglecting credit card payments. My expertise is grounded in a comprehensive knowledge of financial regulations, credit reporting mechanisms, and the intricacies of credit card agreements.

Let's delve into the key concepts discussed in the article:

Responsibility for Repayment:
- When you obtain a credit card, you enter into a financial agreement where you are responsible for repaying the balance.
Minimum Payments:
- Credit card companies mandate that cardholders make at least minimum payments by the due date. This is a crucial aspect of maintaining a positive credit history.
Late Fees:
- Missing a credit card payment results in a late fee, with specific limits set by the Consumer Financial Protection Bureau (CFPB). For the first late payment, the fee is capped, and subsequent late payments within six billing cycles incur a higher fee.
Interest Charges:
- If the credit card balance is not paid in full by the due date, card issuers can start charging interest. Paying the balance in full is recommended to avoid accruing interest charges.
Credit Score Impact:
- Contrary to common misconceptions, your credit score is not immediately affected by a late payment. Creditors can report an account as past due only when it is at least 30 days overdue, leading to a potential drop in the credit score.
Consequences After 30 Days:
- Beyond 30 days, late fees and interest charges continue to accumulate. The credit score further declines, potentially by a significant amount (up to 110 points). The card issuer may also apply a penalty APR at 60 days past due.
Communication from Card Issuer:
- The card issuer will attempt to contact the cardholder through various means (phone, email, or letter) to notify them of the delinquency and its consequences.
Account Closure and Collections:
- If the situation persists, the credit card account may be closed, and the debt sent to collections. This charge-off negatively impacts the credit history, and debt collectors may pursue payment.
Potential Lawsuit:
- Unpaid credit card debt can lead to a lawsuit, either from the credit card company or a collection agency. Legal action may result in wage garnishment and liens on property if the debtor loses the lawsuit.
Timing of Consequences:
- The timeline for these consequences varies, but typically, a credit card may be charged off between 120 and 180 days past due. Legal action may occur after 180 days.

Understanding these concepts is crucial for individuals to make informed decisions about managing their credit. It reinforces the importance of responsible credit card use and prompt repayment to maintain a positive financial standing.