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What penalties occur at the stages of credit card delinquency?

Many Wisconsin residents may have a love-hate relationship with credit cards. They can certainly come in handy when facing a large purchase that may need payments over time or when bridging a gap after a financial emergency. Some people may choose to use their cards simply for the rewards offered.

Of course, credit card use can sometimes turn into a slippery slope. You may think that using your card for a significant purchase is wise, but if you do not pay off your balance in a timely manner, you could accrue interest and other fees. If you end up in a situation where you stop making your payments, you could face a number of consequences.

Timeline for missed payments

The types of repercussions that a missed payment can have vary depending on the stage of the delinquency, which is the amount of time that has lapsed since the payment's due date. Typically, the first stage of delinquency does not begin until the payment is at least 30 days late. If you make your payment within 29 days of the due date, the missed payment will likely not show up on your credit report, but your credit card company will likely contact you and possibly enforce fees.

If your payment is 30 to 59 days late, you can expect late fees and interest. Additionally, the mark will also go on your credit report, which could result in your credit score dropping. The exact effect on your score will depend on various factors.

Additional stages

Stage two of delinquency can start 60 days after a missed payment and last until 90 days. During this stage, you can again expect late fees and interest, but your interest rate itself may also increase. In fact, a penalty annual percentage rate could result in up to 29.99 percent interest. The missed payment will also go on your credit record.

Stage three begins at 90 days of delinquency. At this point, you will likely incur the previously mentioned penalties, and your credit card company may send your outstanding bill to collections. The company may use an in-house collections department or an outside agency. At this point, your credit limit may go down, and your interest rate may go up.

The other stages of delinquency go into effect 120, 150 and 180 days after a missed payment. At these stages, you could face any of the other penalties in harsher form, and at 180 days, the credit card company may charge-off your debt, which means the company sells it to an outside agency and writes off your outstanding balance as a financial loss. While the credit card company itself may no longer have a stake in your debt, you are not off the hook, and your credit score can take an even greater hit.

Finding help

If you find yourself at a stage of credit card delinquency where you face collections and you do not have the means to handle your outstanding debt, you may need to consider your available options. Bankruptcy can often help in such predicaments, and gaining information on this option may allow you to determine whether it could suit your situation.

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