How Credit Card Delinquency Can Harm You (and How to Handle It)
Missed bill payments happen to the best of us, and in many cases, fixing it is as simple as covering the balance and moving on with your life. But credit card debt can quickly spiral out of control if you don’t keep track of the amount owed and the repayment terms. The average American household has about $8,000 in credit card debt , and nearly 9% were behind on payments in the first quarter of 2024. In fact, credit card delinquencies are at their highest levels since the Federal Reserve began collecting data in 2012.
Here’s what happens if your credit card is past due and how to deal with it.
What is credit card delinquency?
Being late on a credit card simply means you missed a payment: just the bare minimum, just one day . The most minor delinquency cases can be resolved quickly and with minimal impact on your debt or your credit score, since most card issuers do not report missed payments to the credit bureaus until they are at least 30 days past due.
If you realize your bill is overdue, pay it as soon as possible. Ideally, this means covering your statement balance in full to avoid late fees and interest that start accruing as soon as you carry the balance over to the month after the due date. If this is your first time missing a payment, your credit card company may waive the late fee (the Consumer Financial Protection Bureau recently reduced the typical fee to $8 ).
However, if your account is delinquent for 30 days or more, you will face more serious consequences, ranging from problems with your credit to account suspension or closure.
What happens if your credit card is expired
If your credit card is more than a month past due, it will appear on your credit report with the three major credit bureaus (Equifax, Experian and TransUnion). You’ll likely notice a drop in your credit score because your history of on-time payments accounts for 35% of your FICO score. It is also possible that your card issuer will freeze your account and you will not be able to make further purchases.
If the delinquency extends to three or four months, your credit card company may suspend your account until you make arrangements to pay off the debt. After four or five months of delinquency, your card may be permanently cancelled, and if you don’t make any progress within six months, the issuer will close your account and classify the debt as a write-off , which will remain on your credit. report for up to seven years.
A charge-off has additional consequences: Your debt may be sold to a collection agency, which will also report it to the credit bureaus, and you will still have to repay the debt in full. Credit card debt collection can take years to complete .
How to deal with credit card delinquency
The best scenario for delinquency is to avoid it entirely by paying your credit card bill on time and in full. If you accidentally miss a payment or need an extra few days, don’t panic: take care of your overdue balance as quickly as possible and continue to make on-time payments moving forward. ( Autopayment is your assistant if the problem is forgetfulness.)
If you are 30 days or more late, don’t ignore it. Call your credit card company immediately to discuss your options—some have hardship programs or customized payment options for customers experiencing financial hardship, and they can work with you to pay off your debt.
If you can’t control your credit card debt by making payments and working directly with the issuer, you may need to consider alternatives, such as enrolling in a debt management plan through a nonprofit credit counselor or a consolidation loan.