23-05-2025
3 things to know about defaulting on your credit card debt
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There are a few things you should know before you fully default on your credit card debt.
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When your credit card debt starts to spiral, it can feel like you're one unexpected expense away from disaster. And, if your budget is eventually stretched too thin by your growing card payments, putting off a payment or two might not seem like a big deal, at least initially. After all, there are other bills, like groceries or rent, that need to take priority at first. But as the interest charges compound on that debt, what once felt like simply falling behind can turn into a more serious issue: default. And while defaulting on a credit card isn't quite the same as defaulting on a mortgage or car loan, the consequences can still be severe.
But despite the consequences, millions of Americans are on the brink of defaulting on their credit card debt right now. Credit card delinquencies have been steadily rising, and serious delinquencies, in particular, which are balances over 90 days past due, have increased significantly year over year. Part of the issue is that with inflation still impacting everyday costs and other economic uncertainties looming, more households are now having trouble keeping up with monthly payments. So when you add in today's nearly 22% average credit card rate, this combination of financial hurdles can be a recipe for serious issues.
If you're one of the many who's teetering on the brink of defaulting on your credit card debt, there are a few important things you should know right now.
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3 things to know about defaulting on your credit card debt
Here are three big things to know if you're worried about defaulting on your credit card debt.
Default doesn't happen overnight — but it hits hard when it does
Contrary to popular belief, you don't enter default the second you miss a payment. Most credit card companies won't consider your account officially in default until it's 180 days (or roughly six months) past due. That said, your credit score can take a hit much sooner. Even one missed payment, meaning a payment that's just 30 days late, can be reported to the credit bureaus and cause your score to drop significantly.
Once you hit default, the credit card issuer will typically charge off the debt, meaning they write it off as a loss and may sell it to a third-party collection agency. This doesn't mean you're off the hook for the balance, however. It just means someone else now owns your debt and will aggressively pursue it, whether that's through phone calls, letters or more aggressive collection tactics.
Before your account hits default, you may want to reach out to your credit card issuer. Some lenders offer temporary hardship programs or may be open to a modified repayment plan. You can also consider working with a credit counseling agency, which can help you consolidate payments and potentially reduce interest rates through a debt management plan.
Explore your debt relief options and start tackling your unpaid debt today.
Default can seriously damage your credit (and stay there for years)
One of the most lasting consequences of default is the damage it does to your credit report. A defaulted account can remain on your credit history for up to seven years, even if you eventually pay it off. During that time, it can be harder to get approved for loans, rent an apartment or even qualify for a job in certain industries.
The earlier stages of delinquency, like 30-, 60-, and 90-day late payments, will also show up on your credit report. But a charged-off account or collections action is a red flag to future lenders, signaling that you may be a high-risk borrower.
If your credit has already taken a hit, don't panic, but do take steps to resolve the issue. One option you may have if you can't repay the full balance is debt settlement, also referred to as credit card debt forgiveness. This strategy involves negotiating with your creditors to pay a lump sum that's less than what you owe.
Just know that debt forgiveness can also hurt your credit in the short term, but might be better than an ongoing default. This strategy can be tricky to navigate, though, so if you pursue this type of relief, you may want to work with a reputable debt relief company during negotiations.
You can be sued for unpaid credit card debt
Once your account has gone to collections, there's a real risk of being sued over the unpaid balance (and the additional fees, interest charges and other costs you've incurred), especially if the debt is large or hasn't been addressed for many months. Debt collectors can and often do take legal action to recover unpaid balances, and if they win a judgment in court, they may be able to garnish your wages or bank account depending on state laws.
In other words, a lawsuit over defaulted credit card debt is a serious matter, and ignoring it can lead to automatic judgments against you. Many people don't realize that they have the right to respond, negotiate or even fight the lawsuit, though, which leads to more severe issues.
If you're facing legal action over your defaulted card debt or think you might be soon, it's time to deal with the problem. You might qualify for protection if you file for Chapter 7 or Chapter 13 bankruptcy, which can halt collection activity and potentially discharge or restructure your debt. While bankruptcy isn't a decision to take lightly, it can be a powerful reset if you're truly unable to repay what you owe.
The bottom line
Financial setbacks happen, but defaulting on your credit card debt is a serious event with long-term financial consequences, so it's important to do everything in your control to avoid it happening. But if you're behind on payments currently or are facing collections, you have options worth considering. Whether it's reaching out to a credit counselor, negotiating a settlement or exploring bankruptcy, the key is to act early and not ignore the problem. With the right help and a clear strategy, default doesn't have to define your financial future.
