Having a past due account is something that every one of us doesn't want to experience. Dealing with the past due credit can be a pain as the longer we delay on having it resolved, the heavier the repercussions are.
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There's always a debate on when does an account falls past due and at times I spent minutes explaining those differences over the phone. In general the moment that your account falls behind on payment even if it is the first day it is called past due already.
During this time, you may receive a phone call from your creditors. If this is the first time that your account fall behind you will be shocked that your creditors are calling you, most of the time the reason why we call is to ask what happened.
At times, it was an oversight but more often than not, payments are not received because simply funds are not available at the time that the bill is due.
You may or may not incur late fees as some companies give a grace period for you to pay your past-due account. Some give a grace period of 5 days and this is where the confusion started.
Most clients would be expecting phone calls after the grace period. But as a rebuttal to them, we explain that the reason why we are calling in early is so that we would know what is happening and take action the soonest to avoid future late fees.
On the first day of being behind, your credit card will be in a suspended status. That means that you cannot make any purchases as long as you are not able to pay at least the MMP or the monthly minimum payment.
When I was a credit card balance collector, I always push my clients to pay the total amount that is due on the card. Making sure that the balance owed is $0.00 after the phone call. Otherwise, ask them to pay a higher amount than the MMP, and lastly if they really can't ask them to at least pay the MMP to restore the service and avoid the account from falling further behind.
Paying only the MMP is not suggested in my experience as you are just extending the balance and the payment for the interest. Always remember that as long as you have a balance on your card it will incur interest.
On the 30th day of not being paid your status will be reported as delinquent to the major credit bureaus. Being reported as late will create a negative impact on your credit score rating.
The credit card company will still chase you to pay the unpaid balance. In most cases, when the credit card hits 60+ days unpaid it will be escalated to the next stage wherein your card will be canceled.
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Once closed, you can either appeal to them to have it restored once the full amount due is paid to them. Or at least bring the account current by paying the MMP's that was not paid.
Phone calls, emails, and letters will still be sent to you if in case the balance is not resolved. Most companies charge-off the credit card after 180+ days without any payment.
When your account is charged-off, you may experience one of the following:
- Since the card has been closed if the balance is too small to pursue. It will just be written off in their books ( meaning, they will just delete your open balance in their file and have it like a forgiven debt). It sounds nice that your debt has been forgiven by the company but the catch is, you may not be able to apply for a card to that company anymore or if they will allow you to have one. Your interest would be astronomically high compared to the other clients.
- If the balance is more than the threshold of being written-off your balance may be sold to a 3rd party collections agency. During this time, if your delinquent account is still in-house I would suggest making the payments to the company rather than the 3rd party collections. Some may say, that dealing with the outside collections agency would be better as they can give some terms and programs that may suit your financial situation. But definitely, it will be your call at that time.
Both escalated steps will create a huge negative impact on your credit rating.
Always remember that when we borrow money, from credit card companies we are ought to pay them on time. By making your timely payments not only do you avoid your account from being reported negatively to the credit bureaus but it helps you build a good credit standing to them.
Having a great credit score can give you more benefits such as job promotion, better interest rates, and better deals with future creditors.
Thank you for reading my blog post, if you have finance and debt management questions feel free to comment those in the comment box. Otherwise, you may want to leave a topic that you want me to share related to debt/credit management and I'll be glad to have it discussed.