The balance is huge, and the interest expenses and possibly other fees are racking up every month. It can seem impossible.
You may have other problems that affect your finances, too, such as unemployment, divorce or a major medical event.
“Credit card debt is not usually the only thing that's wrong,” says Leslie H. Tayne, financial debt resolution attorney and author of “Life & Debt: A Fresh Approach to Achieving Financial Wellness.” “It's not usually done in a bubble. It would be very unusual for someone to say, 'I have one credit card I don't want to pay, and everything else in my life is perfect.'”
See related: 5 ways to avoid (or deal with) late fees
What happens if you stop making credit card payments?
Why you should never stop paying your credit card bill
Unlike a car loan, credit card debt is not secured, so there's nothing for the bank to repossess. Why not just give up?
There are two main reasons you should never just give up and stop making payments on a credit card.
The first is that stopping payments on your account only makes things worse. It starts a process that can put you deeper in debt, wreck your credit, cause you more stress and negatively affect you for years to come.
The second reason is that you have other options. You may need help, but if you tackle your financial problems head-on instead of just giving up on them, you'll be far better off.
The actual consequences of not making payments on your credit card debt depend on you and your circumstances.
“It's so individually specific,” says Tayne. “If you and I both have Amex accounts, and we both owe the same amount of money, that doesn't mean they're going to treat both of us the same.”
For example, someone who is over age 80 and has no assets or income other than Social Security benefits may be what is called “judgment proof.” There's nothing for creditors to seize, and they may not be as concerned about their credit score at that age.
What happens if you stop making credit card payments
Your balance starts going up – fast
The first thing that happens when you miss a credit card payment, even by a few days, is that you incur late charges.
“Most creditors will slap you with a $25 late fee anytime from the day after the payment was due to the 30th day after the due date,” says Todd Christensen, accredited financial counselor and education manager at Money Fit.
Your interest rate may be raised as a result of becoming more than 60 days late, perhaps dramatically.
“Your credit card company can raise your interest rate to what is termed the 'default' rate. Essentially, it is a penalty rate and usually ranges between 25 percent and 30 percent,” says Christensen. “Some of our customers have been hit with default rates in the 60 percent to even 70 percent APR range.”
If your balance exceeds your credit limit, with all the interest charges and late fees, you could pay over-limit charges. Then, you pay more interest on that balance. It's easy for a credit card balance to double or triple once you stop making payments on it.
Your creditor begins contacting you
At first, you may get an overdue notice in the mail. That's easy to ignore. Then, the credit card issuer may call you or send you email or text messages. Receiving calls and messages about an overdue bill can be stressful.
“Collection attempts can be brutal,” says Karen Beth Ford, financial coach and author of Money Matters. “Let's face it, with cellphones in almost everyone's hands, you can choose to ignore a phone call,” she says.
Your credit score takes a hit
Once your payment is 30 days overdue, your card issuer reports it to the credit bureaus. One late payment on an otherwise pristine credit history can lower your score significantly.
Even if your score is less than perfect, another late payment can make it worse. Some people think once their credit is damaged, another ding can't hurt. It can.
“The later your payment is, and the more recent the late payment occurred, the more it will hurt your credit score,” says Christensen.
In addition, the more accounts that are behind, the more adversely your score is affected.
If you're having financial difficulties, a low credit score is the last thing you need. Tayne says low credit scores can especially affect people just starting out – say, in their 20s or 30s – because they need credit as they are getting established.
If your credit score goes down, you will have difficulty getting new credit or a mortgage at favorable terms. You may also see your insurance rates go up. You may not be able to rent an apartment or house, and you may even be turned down for a job.
See related: One late card payment: What's the credit damage?
Your debt may be charged off
After 180 days without payment, the credit card issuer will typically charge off the debt. Being charged off doesn't make the debt go away. It's basically an accounting procedure, and you still owe the debt according to the terms of your account. It is generally sent to an outside or in-house collections agency, where it continues to grow.
Collection attempts continue
The collection agency takes a turn trying to get you to pay, and it may try to get you to settle for a lesser amount. At this point, you may be looking at the statute of limitations in your state or the state that applies to this account, hoping time to collect will run out. However, the owner of the debt won't want that to happen.
“That limitation is based on the state you live in, your assets and your financial circumstances,” says Tayne.
You are sued for the balance
The owner of the debt, generally the collection agency at this point, will probably sue you in court. If you have wages or other income that can be garnished, they can start taking payments from it.
“When you owe a credit card payment and you stop making payments, and it turns into collections, then they can garnish your wages. A lot of employers won't appreciate this,” says Ford.
(If your only income is from Social Security benefits, disability payments or other protected income, they cannot garnish your income.)
Not only is your balance larger now than when you started, but you're making payments again, whether you like it or not. And these payments may be larger than your minimum payments before you defaulted on your account.
The owner of the debt may also file a lien on your assets, such as real estate or your car. A lien is a legal notice that gives the lienholder a security interest over the property to secure payment of a debt. If they place a lien on property you own, they'll get their money plus interest and expenses when you eventually sell.
If time goes by and you aren't sued and you stop hearing from collections, it doesn't mean the problem has gone away. They can still sue you at the last possible moment.
According to Tayne, in the state of New York, they can sue you in six years. A judgment could last 20 years. That means if you get back on your feet financially in a few years, the unresolved credit card balance you quit paying on now could come back and cause negative consequences then.
What to do instead of stopping payments
Instead of stopping payment on your credit card, take a good look at your total financial picture. If you're not sure how to improve your situation, talk to a nonprofit credit counseling organization, or a lawyer. Get someone on your side, and look at all your options.
For some people, a strict budget and changes in their income or expenses may be all that's necessary.
For an unemployed person or another debtor who just needs temporary relief, a hardship program may help. Other credit card holders may need to negotiate their debt balances, or file Chapter 7 or Chapter 13 bankruptcy.
“If you work with someone like myself, there's a plan. We have a strategy and a plan that minimizes the consequences,” says Tayne.
Your plan may include stopping payments, but as part of a controlled process.
“If you're just haphazard, you're going to have a bigger mess and more consequences,” Tayne said.
Tayne sees a lot of misinformation about credit card debt online, some of which encourages people to stop making payments. Or there may be a lot of information that doesn't apply to you.
It's far better to seek help early in the game than to wait until the consequences of missing payments kick in.
“A lot of people think they have it figured out, that there aren't consequences,” Tayne said. “There are consequences. Then they call us and say, 'Help me now!'”
As with so many things in life, the easy way out doesn't turn out to be so easy, after all. People have a lot of things going through their minds when they stop paying their credit card bills, according to Tayne.
“Maybe they're angry, sometimes they cannot pay,” she said. “Sometimes they think they can beat the system.”
However, if you don't pay, by the time your unpaid debt has run its course, you're overstressed, your credit is trashed and your balance is far higher than it was when you defaulted. Unless you are judgment proof, you'll probably end up paying anyway, through garnishments or a lien on your property.
By making a strategic plan and following it and not giving up, you can take control of your life. Set goals and follow through on them, and you'll have more peace of mind and a better financial future ahead.