Wednesday, April 22, 2009

How You Can Survive a Credit-Card Default?

Have you missed a credit card payment and been charged $39? If the fee isn't bad enough, your credit card issuer could also put you in default status. Is it one missed payment or the end of the world?

In our current economy, default is a four-letter-word. Business news headlines tricked us into believing that the D-word could lead us to foreclosure, filing for bankruptcy and basically being in serious debt.

Take a deep breath; it's going to be OK. When the credit card company throws that term your way, it's bad, but it's not the end of the world. No one dressed in black and dark sunglasses is going to knock on your door and make you and your family leave.

Here are four tips on what to know and do when going into default on a credit card.

1. Understand what default really means. In credit card lingo, default simply means you failed to make a required minimum payment before your bill was due. Missing a payment is bad, but what's worse is a charge-off. A charge-off is the personal credit-card equivalent of bankruptcy. It's when you have not made a minimum payment in six months so your bank has deemed your account uncollectible and most importantly, details of your nonpayment may remain on your credit report indefinitely. Think of default as the "oops" and charge-off as the "oh no, now I'm in real trouble."

2. When to expect a default. Credit card companies can put your account into default status within just days of an overdue bill.

3. How much default costs you. You will typically pay the late fee, as much as $39. In addition, your interest rate will sky rocket to the "default" interest rate for up to 12 months, and that rate could be as high as 32%. Many banks have extended their default period from 6 to 12 months in anticipation of next year's credit-card rule changes.

Know how to get out. Now that you're more informed, what do you need to do to get out of default? The most obvious is you pay your bills on time. But so you were backpacking around Europe for a month and simply forgot. What can you do? If you've been a loyal and reliable customer, your credit card company may forgive this mistake. Pick up the phone and call your credit card issuer as soon as you realize you missed your payment. Explain the situation to the customer service representative, then ask him or her to give you a credit for the late fee, and adjust your interest rate. Most of the time, they will oblige because keeping you as a customer is a win-win for both of you.

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Unknown said...

Good work please keep up...

Unknown said...

I appreciate your thought about Credit Card default because now on the day credit card holder facing many problem due to credit card default, So as my views it's great step by author who post this article.
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Unknown said...

Best to default, CC companies bring it on themselves, make them eat it, they can't do a thing, its un-secured credit. As far a your credit score, that is another who gives a crap, just pay with cash, don't become a slave to the banksters.

Unknown said...

To avoid debt I think you should know how to use your credit card properly, stop using credit cards for anything not so important other than emergencies.
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