Credit Card Default
Credit Card Default – Occurs in the event that you have a card balance, and you stop making payments for a certain length of time. Your path to card default is not pleasant and replete with increasingly aggressive telephone calls from the bank you owe the balance to. Let’s investigate a typical scenario:
- You open a $10,000 credit line with XYZ Bank.
- You spend $7,000 on a great plasma TV, a couch, and a stereo system.
- 27 days elapse.
- You lose your job.
- Because of inadequate financial planning, you cannot continue paying your bill.
- You’re $150 minimum payment comes due, and you miss the payment.
- The bank charges a late fee to your account (in addition to interest fees of course).
- The balance on your card goes up by the amount of the unpaid interest, and the late fee, let’s say $170.
- During the next 60 to 90 days, your issuer continues to call, email, mail you and harass you to make the payments to your account. During this time, your card balance continues to increase.
After this, the company will change your account status to Default, and make a negative report to the credit bureaus. Between 90 and 180 days, your bank may start to offer special deals to you to pay off all or part of your balance. They may even offer to reduce your card balance. After 180 days elapse, your bank will probably give up, write off the amount you owe, and sell the debt to an outside collection agency for a small fraction of what you owe. Now, it’s the collection agency that will try to get some money out of you. OK, you can see it’s not a fun experience. You wanted to pay your bill, but you lost your job. What could you do?! Unfortunately, XYZ Bank doesn’t have much interest in your sob story. Slot Game Online
When, If Ever, Is It Safe To Default On A Credit Card?
Well, that depends on your definition of “safe”. You certainly want to avoid default, if you can, but things happen, right? Dave Ramsey has a useful take on prioritizing things. He says that 4 things are at the top: food, clothing, housing, and transportation. You’ve got to have those things to get/keep your job. So, if something must fall by the wayside, it’s got to be your unsecured debts. Slot Game Online.
Prepare For Collectors
There exist many online resources for handling collection agencies. Specific laws exist to protect you from the collection agencies. As with all laws, the important thing is knowing your rights. It will help keep you calm amidst adversity and creditor pressure. Prepare and do your research for the difficult situation you are heading toward. Creditors are aggressive, and you need to know your options in credit card default situations. Slot Game Online.
Effect Of Default On Credit Score
If your credit cards go into default, you can expect your credit score to decrease dramatically. How dramatically? Well, that depends on factors like your initial credit score, and how many cards you default on. FICO has released a few stats explaining the impact on a credit score for various situations. Slot Game Online.
The CARD Act and Universal Default
Good news! 2009’s financial reform laws for the credit card industry actually DID improve somethings. Universal default was where ALL of your creditors could put you into default, if you defaulted on ANY other card, even if you were current on that card, just like dominoes! It used to be brutal! It was an unfair credit practice by the banks, and the CARD Act has prohibited this aggressive credit card banking practice. Slot Game Online.
Recovering From Credit Card Default
OK, so you’ve defaulted. Once you’re through handling the collection agencies, and you’re ready to move on, what do you do to recover? Is it even possible?! Yes, it is, but it will take some time, and patience. Your credit score has been decimated, and you may even have filed bankruptcy. So, it’s often advisable to begin with a secured credit card. Additionally, you may actually find out that, as long as you have a job, creditors are generous with credit again. That’s because, if you’ve filed bankruptcy, they know you can’t file again for another 7 years!
I hope this helps, and good luck to you all…