Sunday, February 3, 2013

What Happens When You Stop Paying Credit Card Debts

Don’t you just wish you can drop everything and run away? When you are burdened with debt, you want to run far away from all your credit obligations and start anew. But deep inside, you know that turning your back on your debt is not the right thing to do - and that is not just for the moral implications.

Running away from any debt, especially your credit card debt is never a good idea. Apart from the fact that it is your obligation to pay back your creditors, you are also setting yourself up for some serious financial problems.

One of the obvious things that will happen when you stop paying your credit card debts is it will increase. This type of unsecured debt is notorious for the additional fees and ridiculously high interest fees. The late penalty charges alone can cripple you - which is usually $25-$35 every month. The exact amount will depend on the credit card company. When you fail to pay your bill - even for just one day, this charge will be added to your outstanding balance and the interest amount will be computed based on that combination. With the current interest rate at 15% (as of January 2013), your next monthly bill can jump into quite a big amount from the previous.

The longer you stop paying, the higher your balance will be. The higher the outstanding balance, the higher the interest will also go. So if you keep on ignoring your credit card payments, you can expect that it will become a really big amount in the next few months.

Your credit score will also suffer once you stop paying your credit cards. The creditors will inform the credit bureaus that you have become delinquent in your monthly payments. Once this is taken into account, your credit score will go lower and lower as long as you refuse to pay your debts. This is a very bad scenario for you - especially when you are planning getting a loan or asking for financial assistance for an investment.

If you do have to default on your payment, you have to make sure that you have a backup plan. Debt settlement requires you to default your bills but that is because you are saving what should have been your monthly credit card payments. You need to grow this as your settlement fund so you have something to offer the creditor once things get ugly.

If you are defaulting just for the heck of it or because you want to run away from your problems, that is probably not a good idea. It is best for you to start looking for a debt relief company that will help you get out of debt.

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