Credit cards can make purchases easier, and will enhance your credit rating if used properly. When times are tough, however, or you rack up a great deal of debt, you may find yourself unable to pay your credit card bills. The consequences of not paying your bills may not be disastrous -- you won't be evicted or dragged off to debtor's prison -- but they can seriously affect your financial health and the overall quality of your life.
Late Fees and Interest
Most credit card companies impose a late fee if you fail to pay your credit card bill every month; that means more money added to your balance every month until you start making payments on time. Furthermore, neglecting to pay your credit card bills can raise your interest rates on your existing balance, as well as interest rates on the late fees you have incurred. That means you end up paying a lot more on your bill than you would if you made the payments on time.
Notices and Phone Calls
To collect the bills they are owed, many credit card companies turn overdue accounts over to collection agencies. Such agencies will begin calling the delinquent debtor at home or at work; the frequency of the calls, and the tone of the caller, may approach harassment levels at times. In addition, a delinquent debtor will likely begin receiving notices in the mail, demanding that the debtor begin paying his bills or else face legal action.
Legal Action
Credit card companies have legal recourse when attempting to collect unpaid bills. Some companies may make threats they can't back up -- such as seizing property or threatening jail time -- but others may make more credible legal threats. Such threats can include, but are not limited to, placing liens on the debtor's property, garnishing the debtor's wages, or even forcing the sale of certain assets to pay back the debt.
Credit Rating
Unpaid credit card bills often result in a severely damaged credit rating, as the credit card companies report the debtor to credit bureaus. This in turn can cause huge problems with other financial transactions. The debtor may not be able to secure a loan to buy a house or a car, she may find herself unable to open an account at the bank from which she received the card, and other creditors may increase their interest rates or take similar punitive steps to ensure that the debtor meets her obligations.
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