What happens to unpaid credit cards?
What can we do to avoid them? The damage that unpaid credit cards can inflect on your life is as
severe as you can imagine.
Penalty fees on unpaid credit cards
First, you can rack up interest rates, penalty fees, and a lot more charges when you miss a payment. You can even
be assigned a default rate, which is the highest interest rate that companies impose. Defaulting will affect not
only the single card you didn’t pay but all other credit card accounts in your name. This will lead to even higher
interest rates, finance charges, and over the limit fees, and a lower credit limit, sinking you deeper into the
debt trap. Not to mention the intermittent calls that you’ll be getting every day from collection agencies.
Account suspension or termination
Credit card companies also have the option to suspend or close the accounts of unpaid credit cards. Aside from
rendering your credit card useless, this will significantly lower your credit score and limit the chances of you
getting approval on your future credit cards. It will also increase your debt-to-credit ratio. However, although
your account is already closed, the credit card company will still collect from you in one way or another the
remaining balances that you owe them.
Unpaid credit cards and your credit score
A simple 30-day overdue will leave a bad mark on your credit score that will last there for seven years. Credit
card companies report delinquencies and unpaid credit cards to the three major credit bureaus every so often and
one month of missed payment can cause a drop on your credit score of up to 100 points. This drop will create a ball
of reaction from your other creditors, causing them to treat you as a risk and eventually raising you interest rate
or lowering your credit score on your other credit cards.
Legal action on unpaid credit cards
When you have unpaid credit cards within the statute of limitations, credit card companies can file a
lawsuit against you. If they win, they can take away your properties, your bank account, and even garnish your
wages. This will not only cause you more stress, it will also increase the number of people that are aware of your
situation. Once your bank and your employer are informed of this, trust becomes an issue. You may have a hard time
in the future proving to your bank that you deserve to be approved for a loan or to your boss that you can handle a
more stressful position. A lot of companies check the personal financial history of job applicants. Once you leave
a mark on your credit history, chances of employment may become more meager.
Source: Credit Cards For People With Bad Credit Rating
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