What Happens If You Stop Paying Credit Cards?

Credit cards are great tools to have if you’re able to use them wisely. Unfortunately, many people get caught in situations where they’ve overspent and cannot pay off their balances in full. 

Worse yet, there are times when some can’t make payments at all. What happens then?

What are those dire consequences? It depends on your cardholder agreement, but in most cases, this is what will happen: 

Interest will accrue on your balance

After the payment deadline, the outstanding balance on your credit card will accrue interest. The annual percentage rate (APR) that you’ll be charged is listed on your cardholder agreement as well as your closing statement.

Interest on outstanding balances will compound until the balance is paid off in full. So, if your balance increased last month due to an interest charge, you’ll now pay interest on top of the old balance plus the interest. 

Most credit cards have a clause that says if you are late, then can increase your APR to the maximum amount allowed. 

Your interest rate will increase to the maximum

This can often mean your rate will increase to 30%+ depending on the card. So when your balance starts compounding (as stated above) at a high rate like this, your outstanding principal balance will grow very very fast. 

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