What Happens If I Stop Paying My Credit Cards?

• 📋 Key Takeaways - If you stop paying your credit cards, you will face late fees, penalty interest rates, credit score damage, and eventually collections or legal action. However, the process follows a predictable timeline and understanding that timeline gives you real leverage. In New York, the statute of limitations on consumer credit debt is just 3 years under the Consumer Credit Fairness Act. Creditors cannot have you arrested, garnish unemployment benefits, or take your home over unsecured credit card debt. Depending on your situation, stopping payments may actually be the first step toward a strategic resolution like debt settlement that saves you thousands of dollars.

We get this question more than almost any other. Someone calls our office and says some version of the same thing: I lost my job, or I had a medical emergency, or my expenses just finally outpaced my income, and I can’t make my credit card payments anymore. What’s going to happen to me?

The short answer is that stopping credit card payments triggers a series of consequences that escalate over time. Late fees, penalty interest rates, collection calls, potential lawsuits, and damage to your credit score. None of that is fun and we are not going to sugarcoat it. But here is what most articles about this topic fail to mention: the process is predictable, it follows a specific timeline, and at every stage of that timeline you have options. Understanding those options is the difference between spiraling into panic and making an informed decision about your financial future.

We have worked with thousands of clients who stopped paying their credit cards, some by choice as part of a debt relief program and some because circumstances left them no other option. In both cases, the people who understood what was coming handled the situation far better than those who were blindsided by it. That is the purpose of this article. We want you to know exactly what happens, when it happens, and what you can do about it at every stage.

The First 30 Days: Late Fees and the Grace Period You Just Lost

When you miss your first credit card payment, the immediate consequence is a late fee. As of 2025, most major credit card issuers charge somewhere between $30 and $41 for your first missed payment. If you miss a second payment within the next six billing cycles, that fee can jump even higher. These fees are added directly to your balance, which means you are now accruing interest on the late fee itself. It is a small but important detail that many people overlook.

During this first 30-day window, something else happens that most consumers do not realize: you lose your grace period. If you were someone who paid your balance in full each month, you previously enjoyed a grace period during which no interest was charged on new purchases. Once you miss a payment, that grace period disappears. Every dollar on your card is now accruing interest from the date of purchase, not the date of your statement. For someone carrying a significant balance, this can add hundreds of dollars in interest charges over the coming months.

📊 The average credit card interest rate in the United States reached 24.26% in late 2025, with penalty APRs averaging closer to 29.99% according to Federal Reserve data. These are among the highest rates ever recorded. (Source: Federal Reserve G.19 Consumer Credit Report)

The silver lining of this first 30-day period is that your missed payment has not yet been reported to the credit bureaus. Most creditors do not report a late payment to Equifax, Experian, or TransUnion until it is at least 30 days past due. So if you can scrape together the minimum payment before that 30-day mark, you will avoid the credit score damage (though you will still owe the late fee). If you cannot, the situation begins to escalate.

Days 31 Through 90: Your Credit Score Takes the Hit

Once your payment is 30 days past due, your creditor will report the delinquency to the major credit bureaus. This is where the real damage begins. A single 30-day late payment can drop your credit score by 60 to 110 points depending on where you started. If you had a 780 score, you might drop to 670. If you were already in the 650 range, you could fall below 600. The higher your score was before the missed payment, the more dramatic the fall tends to be.

At the 60-day mark, your creditor will likely impose what is called a penalty APR. This is a higher interest rate that kicks in after significant delinquency and it can be as high as 29.99% on many cards. Unlike a promotional rate that expires, a penalty APR can last indefinitely. Some issuers will review your account after six months of on-time payments and consider reducing it, but they are under no obligation to do so. This penalty rate applies not just to new purchases but often to your entire existing balance, which accelerates the debt spiral considerably.

During this period, you will also start receiving more frequent calls and letters from your creditor’s internal collections department. These are not yet third-party collectors. They are employees of the credit card company itself, and their job is to get you back on track. This is actually a window of opportunity that many people miss. We have seen clients who called their creditor during this stage and were offered hardship programs, temporary payment reductions, or interest rate decreases. The key is that you have to ask. These programs are rarely advertised and creditors will not volunteer them. You can learn more about what happens to your credit score during this process in our article on the side effects of debt relief.

Days 91 through 180: Internal Collections and the Charge-Off Clock

If your account reaches 90 days past due, your creditor’s tone will shift. At this point your account has likely been transferred to an internal collections department or a specialized recovery team. The calls will become more frequent, the letters more urgent, and the language will start referencing potential legal consequences. It is important to understand that these are still representatives of your original creditor, not third-party debt collectors, so the Fair Debt Collection Practices Act (which we will discuss shortly) does not yet apply to their communications.

Between 120 and 180 days of non-payment, something significant is happening behind the scenes at your credit card company. The creditor is preparing to charge off your account. A charge-off is an accounting term that means the creditor has determined your debt is unlikely to be collected and is writing it off as a loss on their books. This does not mean you no longer owe the money. It absolutely does not. But it does mean the creditor has essentially given up on collecting through normal channels.

📊 According to the Federal Reserve Bank of New York, credit card balances that transitioned into serious delinquency (90+ days) reached 11.1% in Q3 2025, the highest rate since 2011. Total U.S. credit card debt stands at approximately $1.17 trillion. (Source: NY Fed Household Debt and Credit Report)

Here is what we tell our clients about this window: the period between 120 and 180 days is often when creditors are most open to settlement discussions. They know the charge-off is coming. They know that once they charge off the account, they will either have to pursue collections internally at significant cost or sell the debt to a third-party collector for pennies on the dollar (often as little as 4 to 7 cents per dollar of face value). Given those alternatives, many creditors would rather negotiate a settlement with you directly for 40 to 60 cents on the dollar. This is the strategic reality that our debt relief program is designed to capitalize on.

After 180 days: Charge-off, Third-Party Collections, and What Comes Next

At approximately 180 days of non-payment, most creditors will formally charge off your account. The charge-off is reported to the credit bureaus as a separate negative mark on your credit report, and it will remain there for seven years from the date of your first missed payment. After the charge-off, one of two things typically happens. Either the original creditor keeps the account and assigns it to an internal recovery team or external collection agency (where the agency collects on behalf of the creditor for a percentage of what they recover), or the creditor sells the debt outright to a third-party debt buyer.

Once your debt is in the hands of a third-party collector, the dynamics change significantly. Third-party collectors are regulated by the Fair Debt Collection Practices Act, which is a federal law that puts strict limits on how they can communicate with you. Under the FDCPA, debt collectors cannot call you before 8 a.m. or after 9 p.m. They cannot use abusive or threatening language. They cannot discuss your debt with your family, friends, or employer (with limited exceptions). They cannot misrepresent the amount you owe or claim to be attorneys if they are not. And they must provide written verification of the debt within five days of their first contact if you request it.

This is where we see a lot of unnecessary fear from our clients. People imagine that once their debt goes to collections, they will be harassed around the clock by aggressive collectors who can show up at their door or have them arrested. None of that is true. You cannot be arrested for credit card debt. Period. Debtor’s prisons were abolished in the United States nearly 200 years ago. A debt collector who threatens you with arrest is violating federal law, and you would potentially have a claim against them. If you are dealing with aggressive or abusive collection tactics, you can file a complaint with the Consumer Financial Protection Bureau.

Can a Credit Card Company Sue You for Not Paying?

Yes, they can. And we want to be straightforward about this because it is perhaps the most anxiety-inducing aspect of the entire process. If you owe a significant balance and have not made payments for an extended period, your creditor or a third-party debt collector can file a lawsuit against you to recover the money. If they win (and if you do not respond to the lawsuit, they will almost certainly win by default judgment), they can potentially garnish your wages, place a lien on your property, or freeze your bank account depending on the laws of your state. We have a more detailed article on whether a credit card company can sue you for non-payment that is worth reading if this is a concern.

However, there are several important nuances here that most people do not know. First, not every unpaid credit card account results in a lawsuit. The decision to sue depends on the balance (creditors are less likely to sue over small amounts because legal fees may exceed what they recover), the creditor’s internal policies, and whether you have assets or income that could satisfy a judgment. In our experience, balances under $3,000 are less likely to result in legal action, though this is not a guarantee.

Second, and this is critically important if you are in New York: the statute of limitations on consumer credit debt in New York is just three years. This is thanks to the Consumer Credit Fairness Act, which was enacted in 2022 and reduced the previous six-year window down to three. What this means in practical terms is that a creditor has only three years from the date of your last payment to file a lawsuit against you. If they do not sue within that window, the debt becomes what is known as time-barred. You still technically owe it, and it can still appear on your credit report, but the creditor can no longer use the court system to force you to pay.

📊 Under New York’s Consumer Credit Fairness Act (effective April 2022), the statute of limitations on consumer credit debt was reduced from 6 years to 3 years, one of the shortest windows in the country. (Source: NY Senate Bill S153A)

Be very careful about one thing though. In most states, including New York, making even a small partial payment on a time-barred debt or acknowledging the debt in writing can restart the statute of limitations clock. This is a tactic some debt collectors use deliberately. They will call and say something like, can you just send us $25 as a show of good faith? If you make that payment, you have potentially given them a brand new three-year window to sue you. If you are contacted about an old debt, it is worth understanding your rights before you say or pay anything.

What Creditors Cannot Do to You

We spend a lot of time in this article talking about what can happen, and rightfully so. But it is equally important to understand what creditors cannot legally do, because a lot of the fear surrounding credit card debt is based on misconceptions.

Creditors cannot have you arrested or put in jail for not paying credit card debt. This is not a criminal matter. It is a civil one. They cannot garnish your Social Security benefits, disability benefits, or veterans benefits to satisfy credit card debt. In most states, they cannot garnish unemployment benefits either. They cannot take your home through foreclosure over unsecured credit card debt (though a judgment lien could theoretically complicate a future home sale). They cannot take your car unless the debt was specifically secured by the vehicle. They cannot contact your employer to discuss your debt unless they have a court-ordered wage garnishment. And in New York City specifically, creditors are required to include a disclosure in their collection communications if the statute of limitations has expired on your debt.

Understanding these protections matters because it changes the entire calculus of your decision-making. Credit card debt, for all the stress it causes, is unsecured debt. That means there is no collateral backing it. The credit card company lent you money based on your promise to repay, not based on any asset they can seize. This is fundamentally different from a mortgage or a car loan. And it is one of the reasons why credit card debt is so well-suited to resolution through debt settlement. To understand all of the options available to you, our article on what is debt relief and is it worth the consequences provides a thorough overview.

When Stopping Payments is Actually The Strategic Move

This is the part of the conversation that most financial articles either skip entirely or handle dishonestly. The conventional advice is always the same: make at least your minimum payments, contact your creditor about a hardship program, consider a balance transfer. And for many people, that is perfectly good advice. If you have a temporary cash flow problem and you will be back on your feet in a month or two, doing everything you can to stay current on your cards is the right call.

But what about the person carrying $30,000, $50,000, or even $100,000 in credit card debt across multiple cards, making minimum payments that barely cover the interest, with no realistic path to paying the balances down? For that person, continuing to make minimum payments is not the responsible thing to do. It is the expensive thing to do. At an average APR above 24%, a $30,000 balance with minimum payments will take over 20 years to pay off and will cost you roughly $50,000 in interest alone. You will have paid nearly $80,000 for the privilege of borrowing $30,000. Our article on the vicious cycle of revolving credit card debt breaks down this math in more detail.

In that scenario, strategically stopping payments as part of a structured debt relief program can actually be the most financially rational decision. When you stop paying, the accounts eventually become delinquent, which creates the conditions under which creditors are willing to negotiate meaningful settlements. We have seen clients settle accounts for 40 to 60 cents on the dollar, sometimes even less. A $30,000 debt resolved for $15,000 to $18,000 is a dramatically better outcome than paying $80,000 over two decades.

We are, of course, biased here. Debt settlement is what we do. But we also believe in being transparent about the tradeoffs. Settling your debt will impact your credit score in the short term. The accounts will show as settled for less than the full balance on your credit report. You may receive a 1099-C form from the IRS for the forgiven portion of the debt, which could be treated as taxable income (we have written about this in detail in our article on the tax implications of debt settlement). These are real consequences and they should be weighed against the alternative of paying tens of thousands of dollars in interest over decades. For most of our clients, the math is not even close.

The Credit Score Question Everyone Asks

If I stop paying my credit cards, how bad will the damage to my credit score be? This is probably the second most common question we hear, right after what happens if I stop paying. And the honest answer is that it depends on where your credit score is right now.

If you have a credit score above 750, your first 30-day late payment could knock 60 to 110 points off your score. Subsequent late payments, charge-offs, and collections will drive it down further, potentially into the 500s. If your score is already in the low 600s or below (which is common for people who are already struggling with debt), the incremental damage from each additional negative mark is smaller because there is less room to fall.

Here is the perspective we try to offer our clients: a credit score is a tool, not a moral judgment. It reflects your creditworthiness at a specific moment in time. A low score after stopping payments or going through debt settlement is not a permanent condition. It is a temporary consequence of addressing a serious financial problem. Most negative marks fall off your credit report after seven years. Many of our clients see meaningful credit score improvement within 12 to 24 months of completing their debt relief program, especially if they are disciplined about rebuilding. You can read more about this in our article on how to maintain good credit.

📊 According to Experian, the average American’s FICO score was 715 in 2024. A single 30-day late payment can reduce a score by 60 to 110 points depending on the individual’s starting score and overall credit profile. (Source: Experian 2024 Consumer Credit Review)

Common Mistakes People Make When They Stop Paying

Over the years we have seen a few patterns in how people handle (or mishandle) the situation when they can no longer make their credit card payments. The biggest mistake by far is ignoring the situation entirely. People stop opening their mail, stop answering their phone, and hope the problem will go away. It will not. Ignoring a lawsuit summons in particular can result in a default judgment, which gives the creditor the power to garnish your wages or freeze your bank account. If you are served with a lawsuit, you must respond. The worst possible thing you can do is nothing.

The second most common mistake is making partial payments on old debts without understanding the consequences. As we mentioned earlier, a small payment on a time-barred debt can restart the statute of limitations and give the creditor a new window to sue you. Before you send any payment to a creditor or collector, especially on an account that has been delinquent for a long time, you should understand exactly where you stand legally.

The third mistake is taking on new debt to pay off old debt without a clear strategy. We see people opening new credit cards with balance transfer offers, taking out personal loans at high interest rates, or even borrowing from retirement accounts to pay credit card bills. In some cases these strategies can make sense, but more often they simply move the problem around without solving it. If your total unsecured debt exceeds what you can realistically pay off within two to three years through normal payments, it is probably time to explore your options with a financial professional or through a debt relief program. You can start by reading our article on how to handle financial hardship.

There is No Perfect Answer, But There is a Path Forward

If you have made it this far in this article, you probably found it because you are in a difficult financial situation and you are trying to figure out what to do. We want to be honest with you: there is no magic pill for credit card debt. Every option has tradeoffs. Continuing to make minimum payments costs you a fortune in interest. Hardship programs offer temporary relief but do not reduce your balance. Debt settlement resolves your debt for less but affects your credit in the short term. Bankruptcy provides a legal fresh start but stays on your record for seven to ten years.

What we can tell you from years of working with people in exactly your situation is that the worst thing you can do is nothing. Every week you spend paralyzed by fear or shame is a week where interest is compounding, fees are accumulating, and the statute of limitations clock is ticking. Taking any step, whether that is calling your creditor about a hardship program, consulting with a debt relief professional, or simply educating yourself about your rights and options, puts you in a stronger position than you were in yesterday.

We have seen people walk into our office convinced that their financial life was over, only to emerge 18 to 24 months later with their debts resolved, their credit rebuilding, and a genuine sense of relief that they did not think was possible. The path is not always comfortable but it is shorter and more manageable than most people expect. The financial system offers more second chances than you might think. The question is whether you are willing to take the first step.