February 6, 2023
What Happens if you Ignore Your Credit Card Debt

Having a lot of credit card debt can be an incredibly stressful experience, and often leave you with a sense of hopelessness. This can make ignoring all of your credit card debt seem like a good option. So what happens if you ignore your credit card debt?

A Growing Problem

For millions of Americans, credit card debt is a growing problem. More and more Americans are falling deeper and deeper into debt than ever before. And for those that are in this debt, they’ll often find it’s incredibly difficult to get out of it. For some, this can make ignoring your debt and hoping it goes away a very attractive “Solution”. 

But ignoring your credit card debt can trap you in a vicious circle that spirals you further and further down into debt, and it also makes it hard to get out of it. Especially with the way compounding interest works against you in short-term loans like that of credit cards. So, what are the consequences of ignoring your debt?

Missing Your First Payment and Beyond

Depending on the terms of the contract you signed, missing your first payment may not be so bad. But even if you have a grace period for the first time you miss a payment, the clock begins ticking, and you’ll be staring down the barrel of late fees and increased interest rates. It’s not unusual for credit card companies to have an incredibly large bump in interest rates once you miss a payment, which could be anywhere from 3-5 times your initial interest rate. 

And, with interest compounding monthly, this can stack up quickly. After a while, your credit card company will likely shut off your account, meaning you’ll no longer be able to use your card. This is generally the point at which a credit card company will sell your debt off to the highest bidder, and it ends up in collections.

What Happens If Your Debt Goes to Collections?

Eventually, your debt will likely find its way to a debt collection agency. Once it gets there, a few things will begin happening. Firstly, you’ll likely notice a hit to your credit score, this is because collection agencies frequently make reports to the various credit bureaus about accounts they’ve received. Next, you’ll likely start receiving calls and notices from the collection agencies, which can become quite an annoyance. 

This is due to the fact that federal law allows them to call you every single day in an attempt to collect on your debt. Luckily, if you’re still looking to ignore the debt and pretend that it’ll just go away, federal law also allows you to tell them to stop calling. You should be aware, however, that this leaves the collection company with virtually only one option left. Which comes in the form of a lawsuit.

Lawsuits: Don’t Ignore Them!

After ignoring your debt for long enough, your creditor may sue. And while you can ignore the court summons, you do this at your own peril. If you fail to answer a summons or show up to court, your creditor will apply for a default judgment against you. Having a default judgment filed against you could even end up being worse than what you actually owe. 

The potential exists for a collections agency to have the wrong information, and you could end up paying more than what you’re actually obligated to. This is why it’s important to go over the debts the company claims you own line by line, and dispute anything you might find objectionable. That way you only pay for the debts you actually owe.

What Should I Do if I want to Avoid All of That?

One of the best strategies you can employ to avoid the ills that come along with credit card debt is to avoid garnering all that debt in the first place. But that much is obvious, and you wouldn’t be here if you didn’t have credit card debt.

So if you do end up having a lot of credit card debt, and things seem to be spiraling out of control quickly, you’ll first want to make sure you’re meeting your minimum payments. By meeting these minimum payments, you’ll have the potential to avoid major late fees and spare yourself the sharp interest rate increases that come along with it. It also might be worth contacting your creditor, and asking if they have some way to help you pay your bills. 

This will work to show them that you fully intend to pay your debt, which can give them the confidence they need to give you a break and not send you to collections. When a company sends your debts to a collection agency, they’re often selling your debt for pennies on the dollar, so they lose money by doing so. 

But if you contact them, and they’re unwilling to give you a break, a California debt consolidation might end up being a good option for you. Debt consolidation could very well help you get a handle on your debts.

What is Debt Consolidation?

Debt consolidation can be a useful tool when dealing with hefty amounts of unsecured debts. Unsecured debts, like credit card or payday loan debts, often have high-interest rates, and can further hurt your ability to pay them back via compounding interest. Debt consolidation can often help consumers with large amounts of these unsecured debts reduce their interest rates and give them more time to pay back their debts. 
It does this by paying off your old debt and applying it to a new loan with lower interest rates. Another benefit of this is lifting some of the burdens of rapidly increasing debt off your shoulders, and giving you a little breathing room. This can help you get back that sense of control you may have lost. And it could even make you glad you asked the question, “What happens if you ignore your credit card debt?”

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