I lost my job a few months ago and I’ve been using my credit card to pay for many of my expenses. Now, I have a large outstanding balance on that credit card of over $10,000. I can’t afford to make the minimum payment right now. If I make partial payments of less than the minimum amount due, can the credit card company sue me?
Yes, if you fail to make the required minimum payments due on your credit card, the creditor could potentially sue you (among other things), even if you are currently sending in payments. Read on to learn more about what will likely happen if you only make partial payments on your credit card.
Understanding Credit Card Agreements
When you got your credit card, you signed an agreement with the credit card company either electronically or in writing. Under that agreement, you agreed to make a certain minimum payment each month. If you make a payment that is less than the minimum amount due, this constitutes a default under the agreement and is effectively the same thing as missing a payment.
Example. Say your minimum payment is $50, but you only have $20 that you can send to the credit card company. Even if you pay the $20, your credit card company will still consider you delinquent on the account and you’ll face certain serious negative consequences as a result of the default.
What Happens When You Default on the Credit Card Agreement
If you default under the terms of the credit card agreement, the credit card company may do certain things such as:
- charge you late fees of generally up to $26 for the first occurrence (an increase from 2013, when the generally allowed amount was $25) and $37 for a second late payment (up from $35 in 2013) if it occurred within six billing cycles of the first violation
- lower your credit limit
- report the delinquency to the credit bureaus, and
- raise your interest rate to a much higher penalty rate (often in the 30% range). (Learn more in Avoiding High Credit Card Fees.)
Debt collectors will start calling. Each month that you make a partial payment, your credit card account falls further and further past due. If you keep falling behind, the credit card company will probably send your account to its in-house debt collections specialists or hire a third-party debt collection agency to pursue you for payment. (Learn more in What to Expect When Your Debt Goes to Collection.)
The collector will likely call you seeking payment and to let you know what will happen if you don’t pay. In some instances, the collector may offer you a way to settle the debt without paying the full amount by waiving some of the fees that have accumulated, for example. (To learn more about negotiating with debt collectors, see our Debt Settlement & Negotiating With Creditors area.)
The credit card company may sue you. If you still don’t get caught up, the credit card company may decide to sue you for payment. Alternatively, the credit card company may decide to sell the debt to a debt buyer. Credit card companies often sell even small debts to debt buyers, which purchase the old debts for much less than is owed and then try to collect them. The debt buyer may also sue you. (Learn more in Credit Card Debt Lawsuits.)
What You Should Do if You Can’t Make Your Credit Card Payment
If you know you won’t be able to make the minimum payment on your credit card, you should call the credit card company’s customer service department. (You can find the phone number for your credit card company on the credit card itself or at the credit card company’s website.)
If possible, contact the credit card company before you miss a payment or send a partial payment. When you speak to the customer service representative, tell him or her that you won’t be able to make your minimum payment on time this month. If this has never happened before, make sure the customer service representative is aware of this fact. Request that he or she change your due date and ask if the company could waive your late fee.
If you know you won’t be able to make the required minimum payments for a while, find out if the credit card company can lower your interest rate, which would lower your monthly minimum payment. Your credit card company may also be able to temporarily reduce the minimum payment or even reduce the balance you owe. (Get tips on how to do this in our article Negotiating Credit Card Debt.)