Using credit cards can prove tricky for many Tennessee consumers. You may have some people tell you that you need credit cards to help your credit score, and you may have others who tell you to avoid credit cards if possible. Really, whether credit cards help or harm your financial situation depends on how you use them.
If you are someone who has a steady income, only uses a credit card for small purchases and pays off your balance every month, you may have no problem with credit card use or the potential for that use to harm your credit. However, if you face sudden job loss or another emergency, and need your credit card to pay for an expensive purchase or just to get by when it comes to daily needs, your situation could turn dire quickly.
Not making payments
The biggest issue with credit card use that could negatively affect your situation is not making payments. When you miss a payment, your balance goes into delinquency, and you could face a number of negative financial consequences. Those exact consequences depend on the amount of time that has gone by since your payment due date. Some of the stages of credit card delinquency include the following:
- 30 to 59 days: After 30 days of nonpayment, the credit card company will likely apply late fees and interest to your outstanding balance. The late payment will likely also affect your credit score.
- 60 to 90 days: Again, late fees and interest will apply after 60 days of nonpayment. Your annual percentage rate may also increase, which could go up as high as 29.99 percent interest.
- 90 to 120 days: At this point, the previously mentioned penalties will apply, and the credit card company will also likely send your debt to an in-house collection department or to an outside collection agency, which will then attempt to contact you about your debt.
- 120 to 150 days: At this stage, you will face the previous penalties but in more severe forms. Your credit score will continue to drop, and the collection agency will likely make even stronger efforts to contact you for payment.
- 180 days: After 180 days, the credit card company may charge off your debt, which means it will sell your debt to an outside collection agency and consider your debt a financial loss to the company. However, you still have an obligation to pay that debt, and the outside agency will take collections actions against you.
These stages of delinquency may seem frightening, and they can have major impacts on your credit score and other parts of your finances.
If you are struggling to make credit card payments or have a substantial amount of other debt, it may work in your best interests to consider your debt relief options. In many cases, gaining information on bankruptcy can help concerned parties find a way to get back on the right financial track.