Does a Credit Card Company Have to Notify Me Before Freezing My Bank Account?

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Credit card debt can add up over time. If you hit a financial snag, you might find you can’t keep up with your minimum monthly payment. When that happens, at first you’ll see late fees, which only compound your debt, but over time, the credit card company can take action against you. One of those actions can be to freeze your bank account, but you’ll likely know well in advance that this is going to happen. Even if it does, there are legal limits to what a creditor can do.

Tips

  • Before a credit card company can freeze your bank account, it usually has to go through a collections process and legal proceedings, and you will be notified before the freeze occurs.

Credit Cards as Unsecured Debt

A credit card is an unsecured debt, which makes it different from a home or auto loan. If you stop paying your mortgage or car payment, the lender has an asset it can take in the form of your home or vehicle. With a credit card, though, there’s nothing tangible to take, leaving banks with the not-so-easy task of trying to get their money.

Initial Effects of Overdue Debt

Before doing anything else, the credit card company will first try to get you to pay. Once you’re 30 days overdue, the company will try to get in touch with you, usually by letter or phone. After 60 days, you might face other consequences, including seeing your interest rate increase in addition to the late fees you’re being charged. You also likely will see your credit score begin to drop as a result of your missed payments. At 90 days, things get serious. The company likely will close your account and demand the balance be paid in full. At that point, your account might be turned over to a debt collection agency.

Legal Action of Creditors

What happens next depends on the company and your own state’s laws. But creditors simply can’t freeze your bank account. They’ll first need to go through the courts and get a judgment against you, and you’ll have notice that this action is happening. You’ll likely be given the option to attend the hearing and state your own case. If the court rules in the creditor’s favor, you’ll also have notice of this, giving you plenty of warning that a levy will be placed on one of your accounts.

What Creditors Can Freeze

If a levy is allowed, you may get an additional notice from your bank that the request has been made. The money won’t be taken out of your account immediately in order to give you a chance to contest the action, but you’ll only have a couple of weeks, so act quickly. You should also be aware that the creditor can only put a freeze on the amount of money you owe them. If your account balance exceeds that amount, you’ll still have access to those funds. There are limits in some states as to how much of your funds the creditor can take. In Connecticut, for instance, the creditor will have to leave $1,000 in the account, while in New Hampshire, $8,000 will be protected. Many states don’t have such a safety built in, though. If you live in Florida, Montana, Hawaii, Nevada and many other states, your creditor can take everything from your account to repay your debt.

References

About the Author

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.