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When should you stop paying your credit card bills?
It's generally never a good idea to stop paying your credit card bills. Missing a payment by a single day can be costly, and the longer you go without paying the minimum amount due, the more damaging it can be to your credit score and financial well-being.
That said, there are some situations where it can make sense to put your credit card payments on hold while you seek financial relief. Here's what you need to know.
The consequences of missing a credit card payment
Credit card debt can be a significant financial burden, but even if you're feeling overwhelmed, it's important to make it a goal to pay at least the minimum amount you owe each month. If you don't pay, you may be subject to a handful of costly repercussions.
Interest charges
Credit cards typically offer a grace period between your statement date and due date, during which you can pay your balance in full and avoid interest charges. If you miss a payment by even one day or don't pay your balance in full, you'll be charged interest on your unpaid balance.
You'll also lose your grace period, meaning that interest will immediately accrue on any new purchases you make until you pay your balance in full.
Finally, if you go more than 60 days without paying your bill, your card issuer may slap you with a penalty APR, which is higher than your standard purchase APR.
Late fees
Credit card issuers also typically charge a late fee if you don't make the minimum payment by your due date. Historically, this fee has been high, but the Consumer Financial Protection Bureau recently placed an $8 cap on late fees for most credit card issuers in March 2024. Still, that extra charge, in addition to interest, can make it more difficult for you to get caught up.
Credit score damage
Missing a payment by a few days won't necessarily hurt your credit score. But if you go 30 days without paying your minimum payment amount, your card issuer may report the infraction to the major credit bureaus: Experian, Equifax, and TransUnion.
Even a single missed payment can knock roughly 100 or more points off your credit score. If you don't get caught up, your credit will suffer more when your account remains delinquent for 60 and 90 days. If your account is ultimately sent to collection, that's another derogatory mark.
If your credit card balance is high, your score may also suffer due to a high credit utilization rate, which is your card's balance divided by its credit limit.
When should you stop paying credit card bills?
Not paying your credit card bill can do more harm in most cases. But if you're experiencing financial hardship, there are a few situations where not paying your credit card bill can be the right move.
You qualify for forbearance
Credit card issuers are often willing to work with you if you're unable to pay your bill. One potential relief option is credit card forbearance, which can pause or reduce your monthly payments for a period of up to 12 months.
Depending on your situation and card issuer, you could even qualify for a lower interest rate and waived late fees.
That said, you'll need to contact your credit card company to request forbearance. Missing a payment without communicating your situation won't trigger a forbearance on its own.
Credit card forbearance may not hurt your credit score. However, the card issuer may still add a notation to your credit reports, notifying other creditors who may check your credit of your situation.
You want to settle your debt
If you've already missed some payments on your credit card and can't afford to pay off the debt, you may consider trying to settle the debt for less than what you owe. That said, you'll typically need to pay the settlement amount as a lump sum.
So, whether you want to negotiate a debt settlement on your own or you choose to work with a debt settlement company or law firm, you'll typically stop making payments while you save up for the settlement amount.
But again, it's best to communicate your plans with your card issuer, so your debt doesn't get sent to a collection agency.
Also, note that while debt settlement can provide some financial relief, it can also cause severe damage to your credit score. Consider it only if the long-term financial benefits outweigh the drawbacks.
You're filing for bankruptcy
When you file for bankruptcy, the court will issue an automatic stay to prevent your creditors from trying to collect the amount you owe.
In other words, you don't need to worry about making payments as you figure out a plan to liquidate your assets or reorganize your debts, depending on which type of bankruptcy you pursue.
However, before you consider bankruptcy, consult with a nonprofit agency credit counselor to evaluate your situation and determine the best course of action. You can find a local agency through the National Foundation for Credit Counseling or the Financial Counseling Association of America.
If bankruptcy appears to be the right move, work with a bankruptcy attorney to determine how to proceed. Like debt settlement, bankruptcy can cripple your credit score for several years. But again, if you're drowning in debt with no other options, it can be worth it.
Pause before you stop payments
Generally, paying your credit card balance on time and in full every month is best to avoid interest charges and other ramifications. However, if you're experiencing financial difficulties, relief options may be available that allow you to pause your monthly payments.
Before you think about not paying your credit cards, consider different ways to address your debt and the potential consequences of options like debt settlement and bankruptcy.
This article was edited by Rebecca McCracken
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