Defaulted on your credit card? Here’s what you can do

Here at MoneyFor, our goal is to help you make informed financial decisions. We are committed to accuracy and impartiality in all our content. It’s important to note that articles may reference products from our partners who compensate us. This influences which products we feature and their presentation on our site, not our evaluation.

Key takeaways

Defaulting on a credit card means you failed to pay your bill for over six months.
You can recover from a default by paying off the debt, negotiating a settlement, or enrolling in a debt management program.
Staying current on your credit card bills is the best way to avoid default and maintain a healthy credit score.

Credit cards are incredibly useful. You can use them to purchase an item and pay for it later. All while earning rewards. The problem is that you could end up in debt if you don’t pay your bills on time.

Almost half of Americans – 47% of cardholders – carry a balance from month to month, according to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households. Carrying a balance is not a good idea. The outstanding balances will add up – especially with interest rates as high as 23%! If you can’t make a payment, you’re flirting with default.

Learn how to avoid defaulting on your credit card and the steps to take if you find yourself in this situation.

What does default mean on a credit card?

Credit card default is when you miss several months of required minimum payments. After you’ve failed to pay for more than 180 days, your provider assumes you will never pay. They will classify your account as uncollectible and send it to collections.

While consumer debt is growing, U.S. credit card defaults are no longer rising. The St. Louis Fed found that delinquencies – outstanding balances at least 30 days overdue – were at 3.08% at the end of Q4 2024. This is down slightly from the previous quarter. According to LendingTree’s data, delinquency rates are currently below average.

What happens if you default on a credit card?

When you fail to pay for more than 30 days, your account becomes delinquent. Your creditor will contact you and discuss payment options. If, after six months, you have not paid, they will close your account and report it as charged off to the credit bureaus. At this point, it’s sold to a debt collection agency.

The collection agency now owns your debt. These agencies are known for being aggressive in their attempts to collect payment. Expect to be flooded with phone calls, emails, and letters demanding money. The collector can sue you, and if they win, they may garnish your wages or freeze your bank account.

Do you have delinquent debt?

Find out what a delinquent account is and how to deal with it!

How does a default affect my credit score?

Defaulting on a credit card will cause your score to take a nosedive. Once your bill is overdue by 30 days, your creditor will report the missed payment to the credit bureaus. A single missed payment can cause a credit score drop of 20 to 120 points. Each month your credit card debt delinquency continues, you’ll take another hit to your score.

When your account is sent to collections, yet another negative mark is added to your credit report, further damaging your score. Now that your account is closed, your credit utilization ratio shoots all the way up to 100%. It should remain below 30%.

The longer you remain in default, the more severe the credit score damage will be.

How long does a credit card default stay on your report?

A default can stay on your credit report for up to seven years from the initial missed payment. The good news is that as time passes, its impact lessens.

Curious about your credit score?

Discover your credit score here!

How to improve your credit score after default

Credit score damage is not permanent. You can always rebuild your credit. The first step is to handle your debt responsibly. Find a way to pay off what you owe. Paying down outstanding balances will help to lower your utilization rate and improve your score.

Secondly, make paying bills on time and in full every month a top financial priority. Set up automatic payments so you never miss a due date. Keep your balances low so they’re easier to pay in full. Make multiple payments throughout the month so you’re not left with a large bill at the end.

You should also apply for new credit sparingly to avoid hard inquiries. One isn’t a big deal, but a lot will hurt your score. Wait at least six months between applications and try to get preapproved whenever possible.

Lastly, check your credit reports from all three major bureaus. You can get a free copy of your report via annualcreditreport.com once a year. Look for any mistakes and track your progress.

Tips on handling credit card defaults

Defaulting on credit card debt can be a stressful experience. You’re dealing with collection agencies and watching your score plummet. You may be tempted to ignore the problem. While there is a statute of limitations on debt – how long a creditor can take legal action – it’s never a good idea to try to wait the statute out. Statutes of limitations vary by state, averaging three to six years, but can go up to 20 years. Even if you wait it out, you still owe the money. Your best bet is to try to repay what you owe.

The best debt relief options for credit card debt will help you get out of debt for less. You’ll no longer be in default and can start to rebuild your financial life.

Drowning in debt?

Click here to find out how you can stop paying credit card debt!

Paying off credit card debt in full

The best solution is to repay the debt in full. Not only does paying off old debt help your credit score, but it also eliminates all debt obligations and demonstrates a positive payment history. Many creditors offer payment plans with reduced payments or lower interest charges to help you catch up. You can also negotiate credit card debt with your issuer or collector to pay less.

Another option is to take out a personal loan for credit card debt and use the money to repay your creditors. You’ll end up with one loan at a lower interest rate with a fixed payment schedule. Consolidation is a popular way to pay off your debt efficiently and for less.

Credit card debt settlement

Debt settlement is when you pay less than you owe, and the remainder is forgiven. You can negotiate on your own or enter into a debt settlement program. Here, an agent will negotiate a lump-sum payment on your behalf. Always get the agreement in writing.

Settling can reduce your debt burden, but it’s not without peril. If the creditor forgives more than $600, you’ll owe the IRS taxes on the forgiven amount. Your score will suffer as part of the process since settled debts are not considered fully paid.

The top debt settlement companies are accredited by organizations like the American Fair Credit Council and the International Association of Professional Debt Arbitrators.

Debt management

Nonprofit credit counseling agencies offer debt management programs (DMPs) as structured plans to help repay debt. The best debt management programs will be accredited by the National Foundation for Credit Counseling. When you enroll in a DMP, you consolidate your debt into a single monthly payment. The agencies can often reduce interest rates or waive fees to make the payments affordable.

With debt management, you repay debts in full over three to five years. Since you pay in full and establish a history of on-time payments, your score should improve overall on a DMP.

Filing bankruptcy

When all else fails, filing bankruptcy for credit card debt can provide a fresh start. Bankruptcy legally eliminates certain debts and offers relief from collectors. There are two main types of consumer bankruptcy: Chapter 7, which discharges most unsecured debts, and Chapter 13, which reorganizes your debts into a manageable repayment plan.

The benefits of filing bankruptcy include stopping collection calls, halting wage garnishments, and eliminating debt altogether. That said, bankruptcy will significantly damage your score and remain on your report for up to 10 years. It is the last resort to turn to if you’ve run out of options and have no hope of repaying debts.

Frequently asked questions

1. What happens if I don’t pay my credit card for five years?

Your creditor may send the debt to collections, close your account, and potentially sue you. Even if the debt passes the statute of limitations, it will remain on your report and hurt your score for up to seven years.

2. What happens if I never pay my credit card debt?

Your account will go into default, damaging your score. Your provider will likely close your account and sell it to a collection agency. You could face legal action, including wage garnishment or asset liens.

3. How do you get a default removed from your credit file?

To remove a default, you can negotiate a “pay for delete” agreement with your creditor or wait for the default to naturally fall off your report after seven years. If the default is inaccurate, you can dispute it with the credit bureaus.

4. Can I apply for a credit card I defaulted on?

While reapplying for a card you defaulted on is technically possible, approval is highly unlikely even if you’ve rebuilt your score. Credit card issuers tend to keep track of customers whose debt they’ve charged off. Your best bet is to apply for a new card with a different provider.

Bottom line

Staying current on your credit card bills and avoiding default is the best thing you can do. Keep your balances low so you can pay your bills in full each month. Set up autopay or reminders so you never forget a due date.

Sometimes, defaulting can’t be helped. You had a major emergency expense or lost your job, and the bills piled up. Credit card bills are often the first to go, and creditors know that. Give them a call as soon as possible. Many will work with you to help you get back on track.

If you do default, you can always work to raise your rating. It will take time, but there are plenty of tools out there to give you a boost. Secured cards are often among the best credit cards to build credit because they are easy to qualify for. Credit-builder loans are designed to increase your score through consistent on-time payments. Manage your new credit responsibly, and gradually, your score will go up. Credit card default is not the end of the world; you can recover.

1. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions. Current is a financial technology company, not an FDIC-insured bank. FDIC insurance up to $250,000 only covers the failure of an FDIC-insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply. Banking services provided by Choice Financial Group, Member FDIC, and/or Cross River Bank, Member FDIC. The Current Visa® Debit Card, which may be issued by Choice Financial Group and/or Cross River Bank, and the Current Visa® secured charge card, which is issued by Cross River Bank, are all issued pursuant to licenses from Visa U.S.A. Inc. and may be used everywhere Visa debit or credit cards are accepted. A Current debit account is required to apply for the Current Visa® secured charge card. Independent approval required. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

2. Debit card: Fees may apply, including out of network cash withdrawal fees, third-party fees, cash load fees, inactivity fees, account closure fees, international transaction fees, replacement card fees, express mail fees and escheatment fees. Build Card: Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.

3. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Member FDIC, and Cross River Bank, Member FDIC. The Current Visa® Debit Card is issued by Choice Financial Group pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Current Visa® secured charge card is issued by Cross River Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see the back of your Card for its issuing bank. Current Individual Account required to apply for the Current Visa® secured charge card. Independent approval required.

4. Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.

5. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

6. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Funds held in Savings Pods are FDIC-insured on a pass-through basis up to $250,000 at our partner bank Choice Financial Group, member FDIC.

7. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank.

8. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions.

9. Actual overdraft amount may vary and is subject to change at any time, at Current’s sole discretion. In order to qualify and enroll in the Fee-Free Overdraft feature, you must receive $500 or more in Eligible Direct Deposits into your Current Account over the preceding 35-day period and fulfill other requirements subject to Current’s discretion. Negative balances must be repaid within 60 days of the first Eligible Transaction that caused the negative balance. For more information, please refer to Fee-free Overdraft Terms and Conditions. Individual Current Accounts only.

10. For eligible customers only. You may earn Points in connection with your Build Card purchases at retailers whose merchant code is classified as: Dining (e.g., restaurants) and Groceries (e.g., supermarkets) and by completing other actions that Current designates as subject to the Current Points Program. The amount of Points granted for different actions as well as the purchase requirements necessary to earn Points will vary, and is subject to Current’s sole discretion. After qualifying, please allow 3-5 business days for points to post to your Current account. Points will expire 365 days after they settle. For more information (including specific eligibility criteria), please refer to the Current Points Terms and Condition.

11. Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.

12. Boost Bonuses are credited to your Savings Pods within 48 hours of enabling the Boost feature and on a daily basis thereafter, provided that the Savings Pod has accrued a Boost Bonus of at least $0.01. No minimum balance required. The Boost rate on Savings Pods is variable and may change at any time. The disclosed rate is effective as of August 1, 2023. Must have $0.01 in Savings Pods to earn a Boost rate of either 0.25% or 4.00% annually on the portion of balances up to $2000 per Savings Pod, up to $6000 total. The remaining balance earns 0.00%. To earn a Boost rate of 4.00%, the sum of your Eligible Payroll Deposits over a rolling 35-day period must be $500 or more, with at least one Eligible Payroll Deposit equalling a minimum of $200. For more information, please refer to Current Boost Terms and Conditions.

13. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Your money is FDIC-insured on a pass-through basis up to $250,000 at each of our partner banks, Choice Financial Group and Cross River Bank, members FDIC.

14. Average value based on Fine Hotels + Resorts bookings in 2023 for stays of two nights. Benefits include daily breakfast for two, room upgrade upon arrival when available, $100 amenity, guaranteed 4PM late checkout, and noon check-in when available. Certain room categories not eligible for upgrade. $100 amenity varies by property. Actual value will vary based on property, room rate, upgrade availability, and use of benefits.

15. Up to $500 per Covered Trip that is delayed for more than 6 hours; and 2 claims per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

16. The maximum benefit amount for Trip Cancellation and Interruption Insurance is $10,000 per Covered Trip and $20,000 per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

17. Baggage Insurance Plan coverage can be in effect for Covered Persons for eligible lost, damaged, or stolen Baggage during their travel on a Common Carrier Vehicle (e.g. plane, train, ship, or bus) when the Entire Fare for a ticket for the trip (one- way or round-trip) is charged to an Eligible Card. Coverage can be provided for up to $2,000 for checked Baggage and up to a combined maximum of $3,000 for checked and carry-on baggage, in excess of coverage provided by the Common Carrier. The coverage is also subject to a $3,000 aggregate limit per Covered Trip. For New York State residents, there is a $2,000 per bag/suitcase limit for each Covered Person with a $10,000 aggregate maximum for all Covered Persons per Covered Trip. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

18. Car Rental Loss and Damage Insurance can provide coverage up to $75,000 for theft of or damage to most rental vehicles when you use your eligible Card to reserve and pay for the entire eligible vehicle rental and decline the collision damage waiver or similar option offered by the Commercial Car Rental Company. This product provides secondary coverage and does not include liability coverage. Not all vehicle types or rentals are covered. Geographic restrictions apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.

19. Coverage for a Stolen or damaged Eligible Cellular Wireless Telephone is subject to the terms, conditions, exclusions, and limits of liability of this benefit. The maximum liability is $800, per claim, per Eligible Card Account. Each claim is subject to a $50 deductible. Coverage is limited to two (2) claims per Eligible Card Account per 12 month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

20. When an American Express® Card Member charges a Covered Purchase to an Eligible Card, Extended Warranty§ can provide up to one extra year added to the Original Manufacturer’s Warranty. Applies to warranties of five (5) years or less. Coverage is up to the actual amount charged to your Card for the item up to a maximum of $10,000; not to exceed $50,000 per Card Member account per calendar year. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

21. Purchase Protection is an embedded benefit of your Card Membership and requires no enrollment. It can help protect Covered Purchases made on your Eligible Card when they’re accidentally damaged, stolen, or lost, for up to 90 days from the Covered Purchase date. The coverage is limited to up to $10,000 per occurrence, up to $50,000 per Card Member account per calendar year. Coverage Limits Apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

22. Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.

23. The secured Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.

24. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

25. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of September 20, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.

26. There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account.

27. To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

28. Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.

29. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

30. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

31. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

32. SpotMe® on Debit is an optional, no fee overdraft service attached to your Chime Checking Account. To qualify for the SpotMe on Debit service, you must receive $200 or more in qualifying direct deposits to your Chime Checking Account each month and have activated your Visa debit card. Qualifying members will be allowed to overdraw their Chime Checking Account for up to $20 on debit card purchases and cash withdrawals initially but may later be eligible for a higher limit of up to $200 or more based on Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. The SpotMe on Debit limit will be displayed within the Chime mobile app and is subject to change at any time, at Chime’s sole discretion. Although Chime does not charge any overdraft fees for SpotMe on Debit, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe on Debit will not cover any non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe on Debit Terms and Conditions.

33. Tipping or not tipping has no impact on your eligibility for SpotMe®.

34. Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.

35. Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.

36. Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.

37. Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.

38. Funds are automatically debited from your Checking Account and typically deposited into the recipient’s Checking Account within seconds. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed.

39. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed. Non-Chime members must use a valid debit card to claim funds.

* EarnIn is not available for Connecticut residents

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.

Credit Card Default? Here’s How to Bounce Back and Protect Your Credit Score!

Key takeaways

Jump to:

What does default mean on a credit card?