What happens if I just stop paying credit card bills for a few months?

Factual Questions
1

Basically, if I want to not pay on my credit cards for a few (or several) months, until I get back on feet, what’ll happen?

Obviously, I’ll get calls from collectors and whatnot. I mean, if I were to not pay for several months, and then suddenly pay off all of my debt, would that look good or bad on my credit report?

Or, if I went several months without paying, and then paid off all of the past due, and then went back to paying normally ever month, how would that be perceived?
And, does anyone have any recommendations on the vicious cycle of:

  1. Paying credit card bills
  2. Not having any cash, since I paid on all my credit cards
  3. Since I don’t have any cash, I use the credit cards some more

etc, etc…

2

I suggest you spend some time and read the fine printed matter which came with your cards when they were issued to you.

Still have them? I thought not.

Credit cards are a form of a loan. The failure to pay them off regularly, or at least make minimum payments, means you default on the loans. The fine print you probably didn’t keep means the credit card companies exercise their part of the contract you agreed to, are able to find you in default and your credit rating is now at serious risk.

Even if you default for a few months, them pay them off in full, chances are your credit rating has a serious black mark, or three. Unless, and until, you get those marks are erased (by whatever procedures necessary by you and/or the credit card companies in conjunction with the credit reporting agencies), you can expect to be denied credit for car loans, mortgages, even lose out on a potential job offer because of your bad rating.

Suggestion? Contact the credit card companies, explain your problem and work out a temporary solution until you have the funds to make normal minimum payments and/or pay them off.

Your credit rating is similar to your reputation. You may never know when you may need it, and when you do, a bad rating may leave you out in the cold for a long time.

3

I would suggest a consolodation loan - you’ll reduce your monthly payment (they have much lower interest than a credit card), so you’ll actually have cash left after paying it at the end of each month, and paying off all your cards in a big wack actually looks pretty good on your credit report.

You really don’t want to default though - I had a Bay card when I was 18 (a loooong time ago), and I still have a notation on my credit report about it - to get it removed I have to jump through about 278 hoops and I can’t be bothered, however it IS still there.

4

Umm… well if you really want to get off credit cards you need to control your spending and be more thrifty and say “no” to non-critical purchases. If that is not possible or a real world option given your circumstances then the cycle will continue.

With respect to not paying for a few months re the impact on your credit you will be labeled a slow-pay/no pay credit risk (even if you paid it all off at some point) , your credit rating will plummet and your ability to have future credit extended will suffer. Also, (very importantly) you will not be able to hop around the cards and switch over to the best and lowest promo rates for balance transfers as the ability to do this is often contingent on your credit remaining golden. The difference between a 4-6% promo rate and a 19-21% higher risk rate is huge over time depending on your balance. It can cost (or save you) hundreds of dollars a month.

Re paying cards or not - When I got divorced in '96 my circumstances were very strained and some acquaintances urged me to declare bankruptcy. My credit to that date was golden and I decided to muddle through and keep paying my credit card bills.

Credit can be a tool or a rope to hang yourself with. I’m sure I’ve paid for a good portion of at least one credit card exec’s summer home over the last 20 years. I’m in pure commission profession and if times are tough I have over $ 100,000 of credit immediately available to me and cards have saved my ass more than once. You’ve just got to manage them or they will manage you. My advice is to pay the cards and keep your credit rating intact.

5

Best thing to do in my opinion, manipulate your credit card company to work in your favor. All of the below are perfectly legitimate things to do, with the exception of the last thing I recomend to you, you can do with that as you see fit. First, add up all your credit card debt, if you are in good credit report standing, you should be able to call Discover, or equivalent card company, and do a balance transfer. I just moved about 8000.00 from 4 cards to put it all on one card, namel my Discover card. There was no fee on the balance transfer at all, and it was at no interest for 6 months, on top of that, it was set at a fixed rate of 15%. However, when I talked to discover, I told them I wanted to xfer the 8000.00, and got them just up to the point of completing the transaction, then I asked them one more time what the APR was, they told me 15%. I said, ok, im not interested, immediately, the sales person kncked me to 12%. I said naw, thats ok, I have a visa here that is at 7%. Next, I was offered 10%. Then I started getting a little anoyed, and explained to the sales person, look, I can get 7% with Visa, so unless you can meet or beat it, im done here. Annoyingly, they came back at 8.25%. I said look, lets just cancel my card, I dont want it anymore, you obviously can not pay attention. Anyway, we played cards some more, and I got 6%. So, you see, nothing is set in stone, just calling to cancel any card will get you at least a 3% drop, and perhaps a higher limit. This all assumes you have pretty shiny credit.

Finally, I do not endorse this, and I would never do it, but I have known people who have called the CC company before going into rehab, and have had 500.00 just disappear, that was the best I ever heard, as well as huge leniancy on what and when, if any at all, you have to pay while you are in treatment. So, though it is unethical, you can just lie.

Just remember, in my opinion, the only thing a debt consolidator is going to do is the same wheeling and dealing I did with Discover, and they will charge you a fee sometines as well, just do it your self.

6

I have occasionally gotten “Go ahead and skip this month’s payment” offers from one of my credit cards (it’s been a while, so I forget which one), so you can always try to make a deal with your card to skip a month or two if you have a good payment history, however, remember you’ll still be accruing interest!

7

fatdave, I have done exactly what you are suggesting. TWICE.

If you don’t have the money to pay a bill, don’t beat yourself up over it. But DON’T think of this as a harmless tactic.

My theory WAS – I’ve ALWAYS paid off the bills, including tons of late fees and penalties. Therefor I should be a MORE attractive customer, because in effect I was paying them MORE than the card’s interest rate and they never had to sue me to collect it.

Turns out, they don’t see it that way (though I STILL think they’re wrong about that).

At one point, shopping for a car (with my present car near death and HAVING to have a car to keep my job), I couldn’t get credit approval through a DEALER!. Even though my record showed that I was completely debt free, and that my income was more than adequate to pay the installments.

One nugget of good news about the 3 cards I owed on. When I came upon some money (literally a death in the family, and an inheritence) and was able to pay them ALL off at once, with a little negotiation all three companies readily agreed to remove a good chunk of the debt in exchange for total payment. Not the principal and not the interest, but MOST of the late fees that were automatically added on.

However, even THEY do not control your credit record, and the only way they can expunge your history is to claim their reporting was in error. They WILL NOT be able to make it all go away once you settle your bill.

I got out of MY debt hole in 1998, and I am STILL not entirely out of my credit hole. Except for the fact that I’ve recently had ANOTHER inheritence which should tide me over the next few years (in terms of needing to take out a car loan or something), I’d STILL be fucked.

8

I read about some guy who asked if he could charge his credit card balance to his card…I don’t
remember if he did though.

9

Missing payments will totally screw your credit. Don’t do it, if you can possibly avoid it. It doesn’t matter if you pay twice as much when you resume payment – if you’ve missed payments, that’s a huge black mark. No one who evaluates your credit rating thinks about circumstances – they simply apply a formula.

Do balance transfers, or use those access checks they send you, if you can’t make a payment. Don’t just let it slide.

As for the cycle you’re describing (sending all your money to credit cards, then running up the cards), you need to keep track of what you’re spending and what can be eliminated. Figure out how much of your paycheck you realistically need to get by each month, send the rest to credit card, and don’t let yourself spend any more than that. No books, no CDs, no new clothes, nothing. Don’t eat out. It sucks ass, but a few months of being flat broke is way way better than years of shitty credit and/or bankruptcy.