What Happens to a Delinquent Charge Card Account?

Your charge card account will charge a minimum monthly payment. While you can delay paying down the balance, delaying making this payment is not possible. If you do not make the monthly payment on time, your charge account will move into a delinquent stage. Once the account reaches this point, there will be several potential consequences.

Credit Report Impacted

The first, and perhaps most significant, penalty will show up in your credit. You will receive only one notice from the charge card company that you are past due on a bill. If you choose to ignore this notice, the company will report your missed payment to the credit bureau. Even one missed payment can stay on your credit for up to two years. If the payment goes 30, 60 or 90 days past due, the negative affect is exaggerated. Finally, if the credit card moves into a delinquent status, it is reported as bad debt on your credit score. This can represent a drop of 50 points.

Late Fees & Interest Hikes

Financially, you will also be penalized for the delay in payment. You will have to pay a late fee, which can be extremely high if the payment has gone past due by more than 30 days. You may even find a one-time charge as much as 100% of the bill. Because most charge cards are variable rate loans, you may see your interest rate on the card go up. It is not legal to raise interest rates on existing debt. However, the company can still raise the rates on any future purchases. If you want to continue using this line, you will have to pay more for each purchase in the future. It is nearly impossible to get the rate to drop again once you have experienced a rate increase.

Charge Offs

The company or retailer gets penalized for your late payment. Once your debt has gone past due long enough, it is reported as a charge off. A charge off is a loss to the credit card company as entered in its financial reports much like a loan default. Unfortunately for you, a charge off does not mean you no longer owe the funds. The company will see a penalty, and they will pass the penalty onto you. It is common for a charge off to enter a legal process so a court orders you to repay the fees. 

Card Canceled

Ultimately, a company will cancel your charge card if you do not make the payments you owe. This does not occur immediately; a company would rather profit off of your late payments and high interest rates than never have you as a customer again in the future. On the other hand, if the company believes you will continue to miss payments in the future, you will find the company cuts you off. It is best to always have at least one credit card in your name. Plane ticket reservations, hotel rooms and even dinner reservations often require a credit card to hold purchases.


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