What is credit card default?

Credit card default is the status that your credit card account enters into when you have failed to pay your minimum monthly payments for a certain period of time.

Give me an example of someone who is in credit card default:

Bob got his first job and is excited to buy new furniture for his apartment. He charged the furniture to his credit card with every intention of paying the bill by the end of the month. Unfortunately Bob got in a car accident and has both medical and auto bills to take care of that demand his attention before he can take care of the furniture bill.

Bob is unable to make payments on the furniture that he purchased. After missing the first payment, his credit card company charges him a late fee and the loan continues to accumulate interest. After a few months the account will be moved into default, where it will continue to accrue interest. The credit card company will contact Bob incessantly, trying to recoup the loan. After six months with no avail, the credit card company may choose to sell the loan amount to a collection company- in which the pain of collections calls will only multiply, or Bob may be taken to court where a settlement will be negotiated.

Credit card default consequences:

Once your account enters default, your FICO (credit) score will take a significant hit. Hopefully, your experiences with credit card default will make you reconsider totally eliminating the use of credit in your life. Whether or not you will continue to use credit in the future, don’t worry about your credit score for now, there is really nothing you can do about it.

If your credit is damaged, it will cost you more money to borrow money. You will receive higher interest rates on loans, credit cards, and mortgages, and it will be more difficult to be approved in the first place.

What to do if you enter credit card default:

First, prioritize your spending. Make sure that you and your family have food, shelter, utilities, and transportation. Everything else is secondary at this point. Tell the credit card companies that they are not your priority this month, and that you will not be paying them. These companies will use ruthless tactics to try and get you to make any sort of payment, so make sure you understand your rights and credit card default law and how it affects you. Even if they threaten to take you to court, know that they are at risk as well. If you file for bankruptcy, they will not be able to recoup the funds you owe them, and the lawsuit will cost them money as well. After you have secured your family’s needs, try to negotiate with credit card companies for a lower interest rate, and threaten to close your account with them.

Credit card default can be an excruciating process, but there is help available. Consider staying away from credit as a healthy financial alternative to putting you and your family’s well being in jeopardy.

Related posts:

  1. Be Wary Of Credit Card Debt Settlement Offers
  2. Credit Card Dump
  3. Guaranteed Payday Loans: A Guaranteed Way To Lose Money
  4. Buying A Car With Bad Credit
  5. No Need For Credit Cards

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Filed under: Credit Cards • Debt Recovery

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