Can a Credit Card Company Put a Hold on My Checking Account for a Past Due Debt?

Credit card companies have a variety of debt collection options at their disposal. Although your credit card company wants you to pay your minimum payment voluntarily each month, if you fail to do so, the company can force you to pay your outstanding account balance by freezing, and then garnishing, your checking account.

Garnishment Requirements

Private creditors like credit card companies do not have the legal right to place a hold on your bank accounts without a court order. A credit card company obtains a court ordered bank account garnishment by filing a lawsuit against you for your unpaid debt. Should the company win the lawsuit, the judgment in its favor permits it to request a garnishment order from the court. When your bank receives the garnishment order from the credit card company, it then freezes your bank accounts. Credit card companies can garnish both savings and checking accounts with a valid court judgment.

Account Freezes

When your credit card company places a hold on your checking account, it instructs your bank to freeze the entire account -- not just the amount that you owe. Checking account freezes are temporary. The time frame varies by state, but typically a checking account freeze lasts no more than 30 days. If you do not pay off your debt within this period, however, the credit card company will garnish the full amount from your account before releasing the remaining funds.

Past Due Debt

Because lawsuits are a last resort for creditors, missing a payment or two to your credit card provider will not result in a checking account hold or bank account garnishment. If your credit card company takes legal action against you -- and not all do -- it generally will not do so until after it charges off your account balance. Charge-offs take place when your debt is 180 days past due. Thus, you have approximately six months to catch up on payments before you risk a charge-off and subsequent garnishment.

Collection Agencies

Instead of suing you, your credit card provider can charge-off and then sell your debt to a debt collector. When a debt collector purchases your debt, it takes over legal ownership of your account and enjoys the same collection rights that the credit card company once had -- including lawsuits. Do not assume that your checking account is safe simply because your credit card provider no longer owns the debt. If it sold the debt to a collection agency, the collection agency can also use a court judgment to freeze and garnish your account.