It's definitely not something you should test out yourself.
When you get a credit card, you're responsible for repaying the balance. Credit card companies require you to check a box agreeing to this during the application process. You don't need to pay the full balance all at once, but card issuers do require that you at least make minimum payments by the due date.
But what would happen if you decided to never pay your credit card bill? There are several consequences to this, and they get worse the longer you go without paying.
A late fee is the only initial penalty
Once you miss a credit card payment, the card issuer can charge you a late fee. You'll likely see this charge the day after your payment due date. Late fee amounts are capped by the Consumer Financial Protection Bureau (CFPB). By law, credit card companies can only charge up to $30 for a cardholder's first late payment and up to $41 for a subsequent late payment within six billing cycles.
If you don't pay your credit card balance in full by the due date, the card issuer can also start charging you interest. That's why it's recommended to pay your balance in full every month.
There normally aren't any other penalties for the first month. Also, most card issuers will waive your first late fee with them if you call and ask.
Some people worry that their credit score will suffer as soon as they're late on a payment. It actually doesn't work like this. A creditor can only report your account as past due when it's at least 30 days late. If you make your credit card payment 29 days after the due date, it would still be considered on time on your credit history.
After 30 days, the consequences pile up
Once your credit card payment is 30 days past due, that's when the consequences get significantly worse. Here's what will likely happen:
- You'll keep incurring more credit card interest and late fees. Interest charges will continue accumulating as long as you don't pay your card balance. Also, the card issuer could charge you the initial late fee of up to $30, then additional late fees of up to $41 every subsequent time you miss your payment due date.
- At 30 days, your credit score will drop due to being late on your payment. Your card issuer can report your account as past due at this point, and even a single late payment can cause your credit score to drop by up to 110 points. Your credit score will decrease again your account is 60 and 90 days past-due.
- At 60 days, the card issuer can legally apply a penalty APR to your account. A penalty APR is a higher rate on both your current balance and future charges.
During this time, your card issuer will contact you by phone, email, or letter reminding you that your account is delinquent. These notifications will let you know about further consequences if you don't make a payment.
Your credit card account will be closed and sent to collections
Eventually, the card issuer will charge off your account. That means it will close your credit card, write it off as a loss, and send the debt to collections. The card issuer may have its own internal collection agency, or it may sell the debt to a separate collection agency.
The charge-off gets reported on your credit history, which does even more damage to your credit score. You can also expect debt collectors to start contacting you and trying to get you to pay up. At this point, it's wise to learn about dealing with collections so you know your rights.
When will this happen? That depends on the card issuer. It's typically when your credit card is between 120 and 180 days past due, according to Equifax. However, there are no guarantees. It could happen sooner. It could also theoretically happen after more than 180 days, but that's highly unlikely.
You could be sued
Your credit card company can sue you for unpaid credit card debt. This would normally happen after your account is 180 days past due. Or, if the card issuer sells your debt to a collection agency, the collection agency could file a lawsuit against you. It may do so if it's unable to recover the debt from you.
Unpaid credit card debt doesn't always result in a lawsuit. It depends on the card issuer or debt collection agency and the amount you owe. A credit card company is going to fight harder for $20,000 in debt than for $200. If you lose a lawsuit, your wages can be garnished, and liens could be put on property you own.
The price of not paying your credit card bill is steep. It does significant damage to your credit score, plus you'll rack up fees and interest. Make it a goal to pay your credit cards in full every month. If you ever find that you can't pay, contact your card issuer to go over potential options.
