Credit card balances can increase in size easily. The monthly payments can quickly become impossible to pay. What happens if you are forced to default on your credit cards? There are a few important things to know about what happens after you begin to default on your credit cards.
If you default on a monthly credit card payment, your interest rate will likely increase. This can double or even triple your new minimum monthly payment. Many credit cards offer low interest rates such as 8% or less. These rates will increase to rates as high as 15% or even higher than 20% if you begin to default on your payments.
Most credit card payments charge late fees. For the first offense, it is very common to charge $27 for being late. Future offenses may increase the monthly late fee to as much as $38. These late fees coupled with higher interest rates can make credit card payments very difficult. If you are planning to default on your credit cards, you may need to make a plan to get rid of your debts. You may need to settle your credit card debts or file for bankruptcy.
Another consequence of defaulting on credit cards is the lowering of your credit score. Your credit score is determined by a carefully calculated system that takes into account the timeliness of your credit payments. Any missed payments will very quickly effect your overall credit score. This can prevent you from obtaining loans or other credit items due to concerns that you may be forced to default on all of your debt.
If you have excessive credit cards or other debts, it may be a good thing to default on your credit cards if you do not have any other options. Credit cards are “unsecured debts” which means that you will not generally lose a house, car, or other item if you stop paying on the debt. In some situations, it is good to stop paying credit cards first as opposed to your mortgage or car payment. If you are forced to default on your credit cards, you need to talk to a bankruptcy attorney as soon as possible. An attorney can guide you through the bankruptcy process, the settlement of your debts, or some other debt relief option.