What Is Credit Card Delinquency?

What Is Credit Card Delinquency?

by Oct 2, 2018

Credit card debt is one of the most common areas that both individuals and couples struggle with in the financial lives. It’s not uncommon for people to have a half dozen or more credit cards all open and carrying a balance at the same time. But missing (or forgetting) payments can quickly spiral out of control and lead to credit card delinquency.

How Credit Card Delinquency Works

Credit card delinquency is a term that credit card companies use to indicate that your credit card payment is at least 30 days past due. This triggers a series of time-based penalties that can, eventually, lead to your account being cancelled and your unpaid balance being sent to a collection agency.

Here’s how the penalties, generally speaking, break down:

30 Days Past Due: Your late payment status is reported to the major credit bureaus and is added to your credit report. A late payment is added to your account and your credit card company may begin calling, emailing, or sending letters to get you caught up on your payments again.

60 Days Past Due: At this point, the credit card company is allowed to raise your interest rate to whatever their stated “penalty rate” is. The penalty rate will stay in effect for six months. Assuming you make six consecutive payments on time, the penalty rate will be reduced back to whatever it was previously on the existing balance.

180 Days Past Due: If your balance remains delinquent past 180 days, the credit card company can elect to close your account and “charge-off” the balance. When this happens, you will no longer be able to use your credit card, or (more importantly) bring your account current.

The entire balance is due immediately and may be sent to a collection agency if you fail to pay it off with the original creditor.

Recovering From Credit Card Delinquency

Having negative information added to your credit report can be difficult to recover from. Negative information is typically only removed from a person’s credit report if it is proven to be inaccurate, unverified, or past the credit reporting time limit.

The best way to recover from credit card delinquency is, as strange as it sounds, to continue using credit cards and other forms of credit. If you can take control of your finances and spending habits to ensure you always make payments on time, your credit will eventually rebound.

This is where talking with an experienced financial planner can be helpful. A financial planner can help you create a budget and personal balance sheet that will guide your purchases and debt management.

Many people are able to take advantage of the perks credit card companies offer (airline miles, hotel discounts, etc.) by using them for their discretionary spending, but then paying of their balance in full each month.

If you are struggling with credit card debt and need help creating a plan for getting out of it, please contact us today for a free financial planning consultation.

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