Kinda Frugal posts may include affiliate links and is a member of the Amazon Services LLC Associates Program. If you make a purchase using one of these Amazon links, I may receive compensation at no extra cost to you. See my Disclosure Policy for more information.
Some people may fall behind on their credit card payments for one reason or another. This can happen due to circumstances outside our control, such as unexpected job loss or medical problems.
If you’ve fallen behind on your credit card payments, you may wonder what recourse the credit card companies have to recoup the debt you owe them – including aggressively pursuing or even harassing you. Here’s what’s more likely to happen and what your legal rights are.
What the credit card companies will do
A credit card account usually becomes delinquent when payment hasn’t been received by the due date. When this happens, you may get hit with a late fee and/or a penalty interest rate. If no payments have been received after 30 days or more, the account will usually be reported as delinquent to the credit bureaus, which may impact your credit score. The credit card company may begin attempts to reach the cardholder and see if payment arrangements can be made.
If this effort is unsuccessful, the credit card company may pursue other options, such as:
- Legal action against the cardholder to make them repay the debt.
- Charge off the debt as a “bad debt.”
In most circumstances, the charge-off will be the easier option. It may not be in your credit card company’s best interest or worth the time to chase after every outstanding debt. Instead, may sell it to a debt collection agency.
However, depending on the account balance, level of delinquency, and your known assets, the credit card company may choose to pursue you individually and potentially escalate the matter into a lawsuit. Of course, it’s important to remember that court proceedings are expensive. Therefore, they will likely only exercise this option if they believe they can win the case and receive more than the lawsuit costs.
When your debt is transferred to a collection agency
Things may become tense for you if the credit card company transfers the debt to a collection agency. Collection agencies are motivated to make people repay what they owe because this is their primary revenue source. For this reason, they will actively and sometimes aggressively pursue debtors.
What to do if you are being harassed
The Fair Debt Collection Practices Act (FDCPA) says debt collectors can’t use oppressive tactics, such as contacting you at all hours of the night or showing up at your place of employment. If you ever experience any acts that could be interpreted as harassment, know that you have rights, and the collection agency should be reported immediately to the authorities.
The best way to avoid this whole situation is to stay current on your credit card payments, even if it’s only the minimum monthly payment. If you’re struggling to keep up with your credit card because of other debts, it may be in your best interest to consider a debt consolidation loan.
A debt consolidation loan is a loan that will be used to pay off your other unsecured debts. By exchanging high-interest, unfavorable loans for one with a potentially lower interest rate and favorable terms, you’ll only have to worry about one monthly payment that is predictable and more manageable.
The bottom line
When your account is delinquent, credit card companies may take you to court if they believe they have more to gain than the cost of the lawsuit. However, it may be more probable that your debt is turned over to a collection agency which may use more assertive tactics. The best thing to do is to avoid the situation altogether by ensuring you’re in good standing with your credit card provider, even if that means making alternative arrangements.
Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of kindafrugal.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.
