Before we discuss what can be done when there are unpaid credit card bills, let us take a look at some interesting facts-
● Did you know Americans have over 1 Trillion USD in credit debt?
● By 25, around 75% of Americans had a credit card.
● A staggering 85% of adults have and use a credit card regularly. And it’s not just one credit card; it is quite normal for Americans to have more than one credit card; they often have two, three and even up to five credit cards!
● Each borrower has an average credit card debt of $5,000 to $6,000.
● Up to 2% of the borrowers are declared delinquent by banks every year.
Credit cards are used almost daily for various transactions like utility payments, merchandise purchases, household purchases and regular shopping.
Who can apply for a credit card in the USA?
One must be at least 21 to apply for a credit card, regardless of income status. However, one can still use a credit card as an authorized user on their parent’s cards if they are under 18. This is usually done when parents want to build an early credit history for their children. There are cases when children as young as 15 have been using their parent’s credit cards as authorized users. One can also apply for a student card designed especially for 18- to 22-year-olds.
How can I pay with a credit card in the United States?
A credit card’s billing cycle lasts between 28 and 31 days on average. This cycle is mentioned in your monthly statement, which is emailed to you and sent physically to your registered address if you have opted for the same.
How does the American concept of a credit score operate?
Based on your billing cycle, a credit card bill is generated, and you are notified of the total amount due by a specified period and the minimum amount due by a certain date. Your credit score is slowly and steadily built when you promptly make these payments by the due date. Not just this payment but any payments you make towards loan schedule repayments or utility bills add to your credit history and, ultimately, your credit score.
If I can’t pay my American credit bill, what will happen?
It is only human to not be able to manage everything perfectly. We frequently encounter unanticipated incidents on this life’s roller coaster. Unplanned expenses can be very taxing and set us back by a few payments, eventually affecting our credit history. Sometimes, for some reason, a person can’t pay his credit card bills in the USA. The easy availability of credit allows people to make impulsive and unintended purchases. If planned and used appropriately, a credit card can be a blessing. However, when abused, it can lead us to a never-ending debt trap where we may have to look at debt consolidation and relief options.
Your credit card company will inform you when a payment is past due if you need to remember to make it. Usually, this is accomplished by giving you a call, texting you, or even emailing you. Based on the terms and conditions of your card, you may be charged a late fee if the amount due needs to be paid within a specified date. If there are further missed payments, you can also expect an increase in the interest rate, especially if the price is beyond 60 days of the due date.
Apart from the late fees and interest charges, an additional Annual Percentage Rate (APR) can also be added to your account if it is 60 days without a payment. After each billing cycle, your credit card activity and payments are typically reported to the three major credit card bureaus: Equifax, Transunion, and Experian. Whenever there is a missed payment, it gets reported, and your credit score is adjusted accordingly.
What occurs if you settle your credit card debt in the US in fewer than 60 days?
When payments are missed beyond 180 days, the credit card company has to mandatorily charge off the account, close it and write it off as a loss. This does not mean you will not be responsible for the amount you owe to the credit card lender. The lender’s collection department or a different debt collector will now manage our account. In the United States, failure to pay credit card debt may result in legal action against you.
Your credit record may also show a charge-off on your account for seven years. This deeply affects your credit history and your prospects for future credit if and when you need it.
And these collection efforts can be pretty frustrating and taxing mentally. Additionally, a person’s mental health may be impacted by their debt load.
What can you do if you miss your credit card payments in the USA?
There are a few things that one can do if they think they are going to be missing out on monthly payments for any reason:
1. Cut down on monthly expenses by planning and reviewing finances so that you can divert some amount towards paying the minimum due amount.
2. Try setting up an automatic payment from your bank account to ensure you make all the payments.
3. Try to move your payment due date to a more comfortable date when you know that there will be sufficient funds to clear your credit card dues.
4. Contact your credit card company to ascertain if they have any payment relief programs and if you are eligible. There are better solutions than ignoring calls from collectors or just allowing the debt to snowball into a huge issue. Seek help to clear off the debts so that future lenders do not see you as a bad creditor or someone with a bad credit history.In case you are eligible for a payment relief program, find out the complete details about the interest rates and repayment period so that you are well informed before you make the decision.
5. Credit counseling services aim to teach people how to budget their income and expenses. You can find a reliable credit or debt counselor with organizations like the National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA).
6. When you contact your credit card company, explain your situation and look for options like deferring your payment or temporarily reducing your interest rate.
7. Organizations like the United Way offer a hotline – “211”. This hotline offers assistance by connecting you to local organizations that provide help with housing, health care, food and other assistance you may need. Freeing up the money you would otherwise have to spend on such things will help you pay off your debt faster.
How do you manage your credit card in the USA more efficiently?
1. To prevent paying interest, make every effort to make your payments in whole and by the deadline.
2. Plan your monthly finances and expenses through a Monthly Budget Tracker. It might seem daunting and cumbersome initially, but trust us, it will help you plan your finances better.
3. Set up automatic payments if you need help remembering payment due dates.
4. Last but not least, always think twice before you make a purchase. Yes, you have the funds needed to buy whatever you want, but remember that the amount has been loaned to you. Eventually, you are the one who will pay it back by buying things that you don’t need. Your credit card company is laughing its way to the bank by charging you an interest amount.
5. Spend and save- Do both of them wisely.
If you are in deep debt, firstly, do not panic. It would help if you were patient, think with a level head and seek assistance in planning and managing your finances. Your hardships are not permanent, and neither are your riches. Credit cards were designed to make life comfortable and not debt-ridden. So, use the card wisely and calculatedly for the intended purpose and reap its benefits. Control your card, and do not let its allure of easy credit dominate your spending.
Q. Can I be jailed for missing my credit card payments in the USA?
Not at all. Collectors cannot lawfully threaten you with jail time or other legal repercussions. Debt collectors are not allowed to mistreat you orally or physically, lie to you, harass you, or bring up your debt with your job, friends, or relatives.
Q. What happens when a lawsuit is filed against me for failing to make credit card payments in the USA?
If a lawsuit has been filed against you and a judgment has been delivered asking you to pay, the debt collector can garnish your wages, put a lien on your property, or levy your bank account. However, you can prove that your wages need to be increased and that you must support yourself and your dependent family members. In that case, your wages can be exempted from collection.
Q. Are there any kinds of income that are exempt from collection?
Social Security Benefits, VA benefits, GAEDD, CalWorks, Retirement benefits, Pension Plans, IRA, etc, are incomes exempt from collection.