What I am about to tell you, is extremely important this can happen to everyone so please read ahead. What will happen if you fail to pay off your credit card debts? When you know that you won’t be able to make your credit card payment on time, the best option is to explain to your credit card company by calling them. Be honest and ask nicely if you can get an extension of a few days. However, it is vital that you pay within the extended time. If you miss one payment, the company charges you a late payment fee which is around 3% of the payable amount. This doesn’t seem like a big amount at first but in the long run, it keeps accumulating as you keep missing the deadlines.[irp]
With time the interest also goes up and you are permanently marked in the Bank’s records as a potential bad debt. A few times the companies have reported their clients after just one late payment, but generally, one warning is given before reporting. This brings us to our original question what happens if we don’t pay? The bank will start by marking you as a bad debt or a delinquent cardholder and will call you in shorter intervals as time passes by. After a certain number of months of missed payments, the bank hands over your account to a collection agency. These agencies are a third-party organization which can take things from your house and sells them to recover their debts.
Most people fear that they will have to serve jail time, but this is hardly ever the case. This is because it is not a crime yet to incur debt. However, this is only the case if you have a valid reason for missing out on a payment. If you have signed a contract though, then it might become a legal problem which can be taken to court. Your credit history is also ruined if you miss out on making consecutive payments.
This restricts you from getting a loan from any bank in the future or getting any other bank’s credit card for that matter. Some companies are also known to check credit history while employing new staff, so this might also lead you to possibly become unemployed. The good news here is that bad credit scores do not stay in your history forever; this, however, does not mean that the debt has been forgiven or your credit history has been erased. The issue is with the computers which become full after 7-10 years and has to be emptied.[irp]
The worst-case scenario from this would be that if you do get a bad credit history, then you might just have to learn to live off cash, like the rest of the world. Some online companies provide small loans to people with bad credit ratings, but they charge very high-interest rates to protect them.