It can happen to anyone. Debt piles up and then a catastrophe occurs: you lose your job or face unforeseen expenses. When your credit card bill arrives, you can’t make the minimum payment. What happens next?
You’ll be charged a late fee, usually $29 but sometimes as high as $50. Some credit card companies offer a five-day grace period, but others penalize you if you pay even one minute after the due date.
If it’s your first offense and you make the payment within 90 days, you may be able to convince your creditor to waive the late fee. Call as soon as you have the funds available to pay, explain that it’s your first offense and that your credit is otherwise good. The company will probably be happy to work with you.
If you make the payment within 90 days, the missed payment won’t leave a black mark on your credit report. But there could be other ramifications.
If you are enjoying a “special, low introductory rate,” your interest rate will skyrocket to a “default rate”, maybe of 30 percent or more. If you have other credit cards issued by the same bank, your interest rate could rise on those cards, as well. Now your minimum payments—which is dependent on the interest rate–have doubled (or more) on each card, at a time when you can least afford it.
Late payments past 90 days show up on your credit report(s) and adversely affect your credit score. Between 90 and 120 days, the creditor will send your information to their internal debt collections department. As representatives of the credit card company, the employees are usually polite and professional. Bad customer service on their part reflects on the credit card company. But they still have a job to do, which is to get money from you.
If your creditor fails to collect your debt through their internal collections department, it may enlist the help of a third party collections agency. This company may be more aggressive than the original creditor. Additionally, another negative mark goes on your credit report and adversely affects your credit score.
If the third party agency fails to collect the debt, your creditor may sell off the debt to another company. With nothing to lose and massive profits to gain, this third party collector will pull out all stops (possibly even crossing the line into illegal practices) to collect the debt.
It doesn’t have to get this bad, though. You may be able to negotiate a partial payment at any point. A professional debt settlement company should be well-equipped to help you negotiate with bill collectors and reach a settlement you can live with.