Credit card cannot be separated from modern life. Banks and companies issue the credit card to let the customers buy everything easily. In return, they have obligation to pay regular bill consisting of principal loan and interest. Credit card business depends on economy and financial condition. This is a business where the risk is high, but more profitable. What’s happen when client stop paying credit card debt and stop worrying about it? The answer will be explained at following sections.
How Does the Credit Card System Work?
People often have difficulty to distinguish between credit and debit card. Both are useful as payment tool to purchase anything. When you open an account at bank, you receive a card called debit card because all payment you make will reduce directly from your saving. With debit card, you cannot pay more than what you have.
On contrary, credit card is solution that debit card cannot do. You have income from job regularly, but you need to pay certain thing and still have enough saving. You can buy products using money from credit card that will be put into debt. Instead of pay off, credit card holder needs to pay the regular bill alongside interest based on the loan they already take.
When customers stop paying credit card debt and stop worrying about it, there is problem that affects many parties. Firstly, stop paying means the debt will be accumulated including fee and interest. After 30 days, the interest goes higher then it will be at the peak level after no paying for six months. It is normal because the banks or credit card issuers see this situation as disadvantage that leads to loss profit.
You may expect to have stable income for the rest of life. Unfortunately, the depression and financial issue may occur that affect many people, including losing job. You have choice between credit card bill, mortgage, and daily basis needs. Of course, food comes first then you need to think solution to stop paying credit card debt and stop worrying about it.
The bank will contact you regularly to remain about credit card bill, late fees, and interest. It becomes intense calling after three months without paying. Six months are maximum time when the bank decides to take further action. Your account is no longer available and it takes more than regular payment to activate it again.
Second condition related to stopping and worrying paying credit card is lower credit score. What is this score function? When applying mortgage or loans, credit score shows client financial capability. Lower score means bad sign and high risk. You do not pay credit card and lose reputation that leads to difficulty to apply for new loans.
Banks or credit companies have their own way to handle this situation. When client does not pay bill for the credit card, it will be put into loss report. Hedge fund will buy those debts then collect them one by one. In this situation, credit card holder does not have any connection anymore with bank, but will face debt collector. Each state has different way regarding the way debt collector works. It is better to know what happen before start to stop paying credit card debt and stop worrying about it.