The Maximum Penalty for Not Paying Credit Card Debt

The Maximum Penalty for Not Paying Credit Card Debt
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Simply refusing to pay your credit card debt won’t land you in prison – but it might seem that way because of the damaging effect it can have on your future. Failure to pay off your credit cards can have far-ranging repercussions on your credit report, career path and monthly payments of other bills.


  • If you cannot afford to make payments on your credit card debt, you could be subjecting yourself to a series of harsh financial and civil penalties. Not only can your wages be garnished, but your credit score can also be tarnished, making it difficult for you to receive loans or make a good impression on future employers.

Jail Time Unlikely

By itself, failing to pay credit card debt isn’t a crime. Assuming you made purchases with the honest intent of paying the issuer back – and that’s the legal assumption – your failure to do so doesn’t mean you’ll go to jail. The exception comes if the credit card issuer can prove that you made purchases and never intended to pay them back, allowing the company to pursue fraud charges. While those criminal prosecutions are rare, they are not unprecedented. If you take out a credit card and make a lot of luxury purchases just days or weeks before declaring bankruptcy, for example, the issuer may take a closer look at that possibility.

Lawsuits and Garnished Wages

Poor credit can have penalties that go beyond jail time. A credit card issuer can file a civil suit to get its money, or sell your debt to a collection agency that files suit for the same purpose. If a creditor obtains a judgment against you, not only does that go on your credit report, but the issuer can place a lien on your assets to recover the money. It also can garnish your wages by sending the required documentation to your employer, which then is required to comply.

Application Denied

Not paying credit card debt also penalizes your career path. Employers in many states can check the credit reports of job applicants, and a record filled with late payments and court proceedings doesn’t make you look like a reliable candidate. Even if you’re not planning on hitting the job market anytime soon, a poor credit report can cost you the promotion you deserve. In addition, reports indicating nonpayment of credit card debt not only decrease your chances of securing a mortgage, you’re less attractive as a rental candidate as well, since landlords often check credit before agreeing to hand over the keys.

Raising All Rates

Nonpayment of credit card debt has penalties that go beyond that one account. Many credit accounts have “universal default” clauses in their agreement, which state that if you’re more than 30 days late on any one account, they're allowed to raise your interest rates as well based on the increased risk. If you’re planning to default on one high-interest card and keep your lower-interest ones to make purchases, you may soon find that everything in your wallet has penalty rates attached.