Credit card debt is one of the most common reasons people get into financial difficulty, and it comes with one of the highest interest rates. Often, people come to rely on their credit cards during a tough financial time or an emergency, and then find themselves making only minimum payments while interest charges add up. Sometimes, people end up missing payments altogether.
While having some credit card debt is normal, you can set the foundation for a healthy relationship with credit cards, improve your credit rating, and stay out of unmanageable debt. Learn how to practice safe credit and recognize when it might be time to cut ties with your unhealthy credit card relationship.
What happens if I miss a credit card payment?
If you do miss minimum credit card payments, here’s what typically happens:
- If you miss one payment but have a good borrowing history, your creditors may simply send you a polite reminder letter
- Miss two payments, and you’ll get a strongly-worded letter and possibly a phone call demanding payment
- Miss three payments, and your creditor will enlist a collection agency to press you for payment. Collection agencies can make your life unpleasant, using a variety of tactics to get the money, including frequent and persistent phone calls
- If you still don’t pay, court action can be used against you
- If you have outstanding credit card debt that you cannot pay back, it will significantly lower your credit score. Payment history makes up a large portion of your credit score, so you need to resolve your credit card debt in order to prevent further impact on your credit score
Borrowing money for day-to-day purchases such as groceries or other basic amenities is not a good use of credit. Learn more about how to borrow money wisely.
How can I get help with high credit card debt?
Having thousands of dollars in credit card debt is not an unusual situation to be in. The first step to take control of your credit card debt is to consult with a debt professional, who will review your financial options. Determining if you can pay the debt back is important and depending on your situation, this may include finding a solution such as a consolidation loan rolling your debt into a single monthly payment at a lower interest rate, or considering a bankruptcy or proposal to creditors.
How can I get help with joint credit card debt?
If you and your partner have joint credit card debt, then you are both responsible for the debt. If only one of you files a bankruptcy or a consumer proposal, the other person will still be required to pay back the full amount of the join debt. However, if your spouse has never used their card, it is recommended that you contact the creditor and have your spouse’s name removed from the account in an effort to avoid having them liable for the debt.
Learn how your spouse could be impacted by your bankruptcy by watching this video.
Common-law relationships can also have common debt. To learn more, read this article about dealing with debt in a common-law relationships.
What does it mean if my credit card is written off?
There are a lot of misconceptions around what “writing off a debt” means. In the situation of a bankruptcy or successful proposal, the debt is considered “written off” so that the consumer doesn’t have to pay it back. Outside of an insolvency filing, if a debt is written off by the creditor, it does not remove your obligation to pay this debt. Instead, it is a mechanism by the credit card company to get bad debts off of their books.
Often, these debts are sold to a collection agency, and that agency will collect the debt from you, often with significant interest and fees added. They can still call you, sell it to yet another collection agency, or take you to court for collection of the debt. This will often result in a judgment against you and the sheriff can then seize assets or garnish wages to satisfy the debt that you owe.
When a debt collector calls you, make sure to verify the information they provide, including the company the debt collector works for, the amount you owe, and when you start owing it. You can request that they contact you in writing only.
Here are the hours that a debt collector can contact you:
- Monday through Saturday between 7:00 a.m. and 9:00 p.m.
- Sundays between 1:00 p.m. and 5:00 p.m.
A debt collector cannot contact you on holidays, however, they can contact your employer, friends, and relatives in order to get your contact information.
If you feel that your rights are not being respected by a debt collector, you can contact the Financial Consumer Agency of Canada.
For more information about the debt collection process, including what a debt collector can and cannot do, visit the Government of Canada website article on dealing with a debt collector.
Get started with credit card debt relief
There are many ways to address your credit card debt problems. To learn about all your options, meet a Grant Thornton debt professional for a free, no-obligation chat, over the phone or in-person.