Charge card vs. credit card: What is the difference?

If you don’t pay your credit card bill at all, you will likely get charged a late fee, lose your grace period and have to pay interest at a penalty rate. Your credit score will also take a hit. If you continue to not pay, your issuer may close your account, though you’ll still be responsible for the bill. They could eventually … read full answersue you for repayment, too, or sell your debt to a collections agency (which could then sue you). But it’s not all or nothing with credit card payments. It’s an entirely different story if you don’t pay the full balance due but manage the minimum amount required. If you pay the minimum by your due date, you’ll get credit for paying on time and won’t have to face late fees, penalty rates or credit score damage. You’ll just have to pay interest on your balance at your card’s regular rate.

Here’s what happens if you don’t pay your credit card:

• If you pay the minimum required but not the full balance due, your total unpaid balance will accrue interest at your card’s normal APR. You’ll also lose your grace period, so new purchases will accrue interest right away, too.
  
• If you don’t pay at all, your account will be reported as past-due to the credit bureaus after two missed due dates. That will hurt your credit score, and the damage will get worse the further behind you get. A late fee of up to $38 may be tacked onto your balance, too. But the fee can’t exceed your minimum payment. Your issuer may also apply a penalty APR to new purchases, though they must inform you 45 days in advance. They can apply the penalty APR to your entire balance if you become more than 60 days delinquent.
  
• If you get 180 days behind on minimum payments, the credit card company will have to charge off your debt (consider it a loss). But that doesn’t mean they’ll stop trying to get you to pay. They may sell your debt to a collections agency, or they may choose to sue you.
  
• If you don’t pay for 3-15 years, you are vulnerable to a lawsuit, depending on which state you live in. Time-barred debt is not a valid defense until your state’s statute of limitations runs out. If you lose a lawsuit and are ordered to pay, you might have your wages or bank account garnished.
  

So the bottom line is that you should always try to make at least the minimum payment on your credit card. Sure, you’ll still owe interest, but you won’t have to deal with the other negative consequences of not paying at all.

If you’ve fallen behind, the most important thing to do is catch up on your missed minimum payments and bring your account back to current status. After that, your goal should be to pay your full balance due for two months straight. Though that sounds easier than it is, doing so will restore your grace period and stop the buildup of new interest.

In order to negotiate credit card debt successfully, your first step must be to determine the facts of the situation. You need to know exactly how much you owe, whom you owe (not always obvious), how much you could afford to pay in both a lump sum and monthly installments, and how much you’d need to pay to bring your account back to good standing (if it hasn’t already defaulted). All of this information should be listed on your latest account statement. The second step is to do a bit of research. You might find some online posts from people who’ve previously negotiated credit card debt with your bank or credit union, for example. … read full answer

Next, consider your creditor’s motivations and devise a plan for the negotiation itself. Credit card companies obviously don’t want to make any major concessions – such as lowering your APR, reducing your minimum monthly payment or forgiving part of your balance – without getting anything in return. But they do want to get paid, and something is better than nothing in that regard. So identify your ideal outcome (your initial “ask”), the limit of what you’re willing and able to do to make it happen (your final offer), and an initial “bid” that gives you room to offer more if necessary. From there, it’s all about rehearsing the initial phone call to your creditor, anticipating potential issues and executing on your plan.

If you’re dealing with an old debt, or there’s any doubt about the accuracy of your balance, be careful not to admit that you owe the amount in question or promise to pay. Doing either could reset the statute of limitations, giving the debt collector a better chance of suing you and winning.

Learning as much as possible about the negotiation process ahead of time is the best way to increase your chances of coming out on top. So we’ll give you a step-by-step recap of how things work.

Here’s how to negotiate credit card debt:

1. Figure out how much you owe. You should have a clear sense of what debts you have and to whom you owe them.
2. Determine how much you can reasonably pay and what it would take to bring your account(s) back to good standing.
3. Research other people’s experiences negotiating debt with your creditor, noting what has and has not worked.
4. Come up with a plan for negotiation. You must have a clear sense of what you are trying to achieve, including both your ideal outcome and your final offer. In other words, know the breaking point at which a revised agreement would no longer be helpful, given your ability to pay.
5. Contact your credit card’s issuer, or the debt collection company that sent your last bill, if applicable. Explain why you’re finding it difficult to make payments on your debt, emphasizing any factors that are out of your control, like the loss of a job or sudden medical bills. Express your desire to pay what you owe, just with a little flexibility.
6. Present your offer to the issuer, explaining why it’s mutually beneficial. Listen to their counteroffers, if any. Always be polite, as friendliness can go a long way in negotiations.
7. Get an agreement in writing, if you’re able to work something out. Make sure to get it in writing, too.

Every person’s situation is different, so it’s hard to give specific tips on the ideal solution for you without knowing how much debt you have and what’s preventing you from paying for it. But as long as you make a well-thought-out plan and communicate with your creditor, your chances of success definitely improve.