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CBS News
02-07-2025
- Business
- CBS News
What happens if your credit cards are closed due to non-payment?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Your credit card issuer can close your account due to non-payment, and if that happens, it can have big repercussions for your finances. Getty Images With inflation still pinching budgets and many Americans living paycheck to paycheck, credit card payment problems have been creeping upward. For example, more people are struggling to keep up with their monthly credit card payments right now, and the percentage of cardholders who are seriously delinquent is also climbing. When you miss payments for an extended period, though, the extra fees and interest charges aren't the only issue you'll face. Your credit card accounts could also be closed by the issuer. While a closed account might sound like a way to stop the bleeding, the truth is that it can cause an entirely new set of problems, especially when the closure was due to non-payment. But while a closed credit card account can negatively impact your finances, the reality is that once an account is closed due to a lack of payment, dealing with the issue is not as simple as picking up where you left off. So what exactly happens if you've missed multiple payments on your credit card and the issuer closes your account? Below, we'll examine what to expect in this situation — and what you can do to minimize the damage. Chat with a debt relief expert about the help available to you now. What happens if your credit cards are closed due to non-payment? When you miss credit card payments, the consequences unfold in a predictable sequence that gets progressively more serious. You'll initially face late fees and penalty interest rates, but if you continue missing payments for 60 to 180 days, your card issuer will likely close your account and charge off the debt. The account closure itself creates immediate problems. You lose access to that credit line, which can be particularly problematic if you rely on the card for emergencies or regular expenses. Any automatic payments tied to the closed card will, in turn, fail, potentially creating a domino effect of late fees and service interruptions with other accounts. Your credit score takes a significant hit from multiple angles, too. The missed payments that led to the closure will already have damaged your score, but the closure itself creates additional problems. When an account closes with a balance, your credit utilization ratio, which is the amount of credit you're using compared to your total available credit, suddenly increases. If other cards remain open, you're now using a higher percentage of your available credit, which further harms your score. And, the debt doesn't vanish when the card closes, either. The credit card company will either attempt to collect the debt internally or sell it to a collection agency. You'll start receiving collection calls and letters, and the collection account may appear as a separate negative item on your credit report. In some cases, creditors may pursue legal action to obtain a judgment against you. A closed account on your credit report also signals risk to other lenders. If one of your credit cards was shut down due to non-payment, you may find that your other creditors suddenly reduce your credit limits or increase your interest rates, even if you're current on those accounts. That's because lenders regularly review borrowers' credit profiles and make changes based on perceived risk. You may also struggle to qualify for new credit cards, personal loans or even car financing in the short term. If you do get approved, expect less favorable terms, such as higher interest rates or secured credit lines. In some cases, you may need to rebuild your credit history with secured credit cards or credit-builder loans before you can qualify for traditional credit products again. Explore your credit card debt relief options online today. What to do if your credit card account was closed due to non-payment Once your account is closed, the most important thing is to address the debt. Ignoring it will only make the situation worse. Here are a few steps you can take: Contact the creditor or debt collector: If the debt hasn't yet been sold to collections, you may be able to negotiate a payment plan debt forgiveness If the debt hasn't yet been sold to collections, you may be able to Check your credit report: Make sure the account information is accurate on your credit report Make sure the account information is accurate on Look into debt relief options: If you have multiple accounts in similar situations or can't reasonably pay what you owe, working with a debt relief company or credit counselor may help. These experts can walk you through options like debt settlement, debt management or even bankruptcy If you have multiple accounts in similar situations or can't reasonably pay what you owe, working with a debt relief company or credit counselor may help. These experts can walk you through Start rebuilding your credit: Over time, the impact of a closed account will fade. Keep any remaining credit accounts in good standing, make on-time payments and consider using secured credit to help rebuild your score. The bottom line Having your credit cards closed due to non-payment is a serious financial event but it's not the end of the road for your finances. While it can significantly damage your credit score and limit your borrowing options in the short term, it also presents an opportunity to take control of your debt and reset your financial habits. It's important to take action early, though — whether that means reaching out to your card company for help when you first struggle with payments or working systematically to rebuild your credit after a closure occurs. While the consequences are serious, they're not permanent, and with time and consistent effort, you can recover your financial standing.
CBS News
26-06-2025
- Business
- CBS News
5 ways to deal with your charged-off credit card accounts now
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. You aren't really free of what's owed if your credit card debt has been charged today's economy, relying on credit cards isn't just common. For many people, it's a necessity. From covering rising grocery bills to managing emergency expenses, more people are leaning on this type of short-term borrowing just to stay afloat. But if you're using credit cards to fill in the gaps and those balances spiral out of control, causing you to miss payments, the consequences can be serious. If you fall too far behind, you might even get hit with a charge-off notice, which is a sign that your credit card issuer has written off the debt as a loss. But here's the reality of the situation: While a charge-off means the lender is considering your debt a loss, it doesn't wipe your slate clean. It simply means the original creditor no longer expects to collect the money you owe. You're still legally on the hook for the balance (along with the interest and fees), and the charged-off account can damage your credit score for years on end. It may even end up in the hands of a debt collector, triggering constant calls, letters or a lawsuit. Fortunately, you're not out of options if this happens. Whether you want to resolve the issue quickly or are looking for longer-term relief, there are several ways to deal with your charged-off credit card accounts now. Find out how to get extra help with your high-rate credit card debt. 5 ways to deal with your charged-off credit card accounts now With a charge-off, the debt is still legally owed by you, so you'll want to deal with the issue as soon as possible. Here are a few ways you can do that now: Option 1: Pay the full balance immediately If you have the cash available, paying off the entire charged-off balance is often the cleanest solution to dealing with this type of debt. This approach stops any further collection efforts, prevents additional fees and interest and shows future lenders that you ultimately made good on your debt. While the charge-off will still appear on your credit report for seven years, having a zero balance looks significantly better than an outstanding debt. The downside? You'll pay the full amount when you might have been able to negotiate for less. Learn more about the debt relief options available to you now. Option 2: Negotiate a lump-sum settlement Many people don't realize that creditors will often accept significantly less than what's owed on charged-off accounts. Depending on how old the debt is and the creditor's policies, you might settle for anywhere from 30% to 50% less than the original balance (on average). So, this option can save you substantial money while still resolving the debt. The key to successful settlement negotiations is having cash ready and being persistent. Start by offering 25% to 30% percent of the balance and work your way up. And, be sure to get any settlement agreement in writing before sending your payment. Option 3: Set up a payment plan If you can't afford a lump sum but have reliable income, your creditors may work with you on a payment plan. This approach allows you to chip away at the debt over time while demonstrating good faith effort to repay what you owe. Payment plans typically involve monthly payments over 12 to 36 months, and some creditors may even reduce the total amount owed if you stick to the plan. Before agreeing to any payment plan, though, make sure you can realistically afford the monthly payments. Missing payments on a settlement plan can restart collection efforts and potentially lead to legal action. And, be sure to clarify whether interest will continue accruing during the payment period, too. Option 4: Dispute the debt if it's inaccurate Sometimes the best approach is to challenge the debt altogether. If you believe the charged-off account contains errors, whether it's the wrong amount, not your debt, has already been paid or is past the statute of limitations, you can dispute it with the credit bureaus. With this route, you'll send a debt validation letter within 30 days of first contact from a debt collector, requesting proof that you owe the debt and that they have the right to collect it. If they can't provide adequate verification, you can dispute the account with credit bureaus. Option 5: Let it age out naturally Charged-off accounts automatically fall off your credit report after seven years from the date of the first delinquency. So, in some cases, the best strategy might be to do nothing and let the account age off your credit report. But while this option doesn't cost money upfront, it does mean living with damaged credit for the full seven-year period. Creditors can still attempt to collect the money owed during this time, and in some states, they might even sue you if the debt is large enough. The bottom line Charged-off credit card accounts can be tough to deal with, but they're not the end of your financial story. Whether you're ready to pay it off, negotiate a settlement or dispute the debt entirely, there are multiple ways to tackle the problem. However, you'll need to choose the approach that fits your financial reality and take action before things get worse. Ignoring a charged-off account won't make it disappear, but the right strategy can make it far less painful.
