Overdue on credit card payments? Here's your action plan at the 30th, 60th, and 90th days.
Stepping Up to Eliminate Soaring Credit Card Debts: A Comprehensive Guide
In this era of ever-rising living costs and high credit card interest rates, many people find themselves drowning in debt. With the average credit card interest rate lingering above 21% and inflation nudging budgets to their limits, it's no surprise that mortgage and essentials are increasingly challenging for many Americans to handle, leading to a spike in delinquent credit card payments.
But don't panic if you've slipped up on a payment - there's still time to get back on track before the situation spirals out of control.
Just One Missed Payment Can Trigger Trouble
At 30 days past due, you can expect your credit card issuer to impose a late fee (around $30 to $40) and stack additional interest on your existing balance, boosting the cost of that debt even further. However, most lenders won't report the late payment to the credit bureaus until you're more than 30 days overdue. This gives you a chance to act quickly and potentially safeguard your credit score. Follow these steps:
- Pay the minimum payment as soon as possible to stave off more penalties and prevent reporting to the credit bureaus.
- Give your credit card company a call and explain your predicament. They might waive the late fee, especially if it's your first offense or you've proven to be a diligent payer thus far.
- Set up reminders or autopay to help you stay on schedule moving forward and avoid future mishaps.
When Things Get Serious: 60 Days Late
If you've missed two monthly payments, your account will likely be reported to the credit bureaus, causing your credit score to take a nosedive, particularly if it was previously pristine. You'll also likely face a penalty credit card APR, which can top 29.99% or higher, exacerbating your debt burden.
At this point:
- Contact your creditor once more and ask about a hardship program that may lower your interest rate, reduce your minimum payment, or temporarily postpone your payments.
- Consider consolidating your debt via a lower-rate loan or a balance transfer credit card with a tempting 0% introductory rate to create some breathing room - if your credit score still warrants it.
- Tighten your budget, eliminating nonessentials and directing every extra dollar towards your payment.
Urgent Action: 90 Days Late and Beyond
Three months late, and you're in deep waters. Most credit card issuers will escalate your account to a collections department or sell it to a third-party debt collector. Your credit score will likely drop even further, and depending on the creditor's policies, you might find yourself facing legal action.
To avoid the worst-case scenarios:
- Negotiate a payment plan or settlement with the creditor or collection agency. They may be open to forgiving some of the debt or devising a structured repayment plan to help you get back on track.
- Enlist the assistance of a credit counseling agency to set up a tailor-made debt management plan or seek out advice from a debt relief company to explore other options if you're struggling to stay afloat.
- Engage a lawyer specializing in debt issues if a lawsuit is looming. Ignoring a debt lawsuit can result in a default judgment against you, leading to repercussions like wage garnishment or bank account levies.
The Takeaway
Slipping up on credit card payments is more prevalent than you may think, especially in today's financial climate. But if you're behind on your payments, it's essential to tackle the issue promptly to avoid worsening your credit, peace of mind, and financial future. Whether you're 30 days late or spinning rapidly towards collections, reach out to your lender, research your relief options, and take small steps towards a sustainable solution.
Bylines:
Angelica Leicht - Angelica Leicht is the sharp-witted senior editor of our personal finance section, where she crafts and edits articles on every topic from debt management to budgeting strategies. Her work history boasts editing roles at The Simple Dollar, Interest, HousingWire, and other respected financial publications.
- Stay informed about your personal finance, as current news in finance and law, such as rising credit card interest rates and changes in credit reporting laws, can significantly impact your ability to manage credit card debt.
- If you're behind on your credit card payments, research options in finance, such as balance transfer credit cards, debt consolidation loans, or hardship programs, to help alleviate the burden and protect your credit score.
