Credit card debt is at all time highs and the ability to pay the monthly payments has been limited by high unemployment and a shaky economy.
When you apply for a credit card, you check a box where you agree to the “terms and conditions” for your new account. These terms are written in tiny print with a lot of legal terms.
It’s boring to read and most of us don’t bother to read all the fine print. Years later, when we’ve lost our job and can’t pay our bills we panic when we wonder if credit card companies can seize your bank account.
What Happens When You Can’t Pay
In years past, if you were late paying your credit card bill you would receive a late notice by postal mail. Usually the notice was not sent until the payment was 10 days late. Credit cards were issued by many smaller banks and lenders back then.
If you knew you would be a couple days late with a payment, you could call the customer service phone number and there’s a good chance they would waive the late fee and you’d have no problem.
Today, most credit cards are issued by a handful of huge financial institutions. There is no personal touch or forgiveness of fees for most account holders.
Avoiding The Late Fee
In rare instances, if you have a good record of payment over time, you may avoid a late fee if one payment is received after the due date. Increasingly, lenders are refusing to waive any fees at all.
If you fail to make a monthly payment by the date due you can expect a phone call within a couple days. You may also receive a late notice by mail but lenders are more aggressive now about late paying accounts.
Can a creditor seize your bank account if you fail to make payment? No – but the collection departments can make your life miserable.
They will phone you daily and insist on payment. You will not be able to use your credit card for any charges as the purchases will be denied for an account in arrears.
Card companies can seize your bank account only if they are awarded a court judgment. State laws regulate how default judgments may be collected and each state has different standards and laws.
If you have money in a bank account and your credit lender sues you in court for payment, you may find your money is frozen by the court.
In some states, the bank account may be frozen at the time a suit is filed and may remain frozen until the court issues a ruling.
There are states where a ruling against you will result in the credit card company seizing your bank account to pay the judgment. The laws are so varied from state to state, it’s impossible to give a firm answer.
Your state may simply take the money in your bank account and give it to the lender or may allow you time to pay the judgment.
If the bank account is jointly owned with your spouse, the court in some states may declare the account off limit while other states provide no such protection.
Is your credit lender allowed to seize your bank account and remove more money than the balance of your debt?
Yes, they can if permitted by the courts. If you end up in court for nonpayment of credit card debt, you will pay far more than the original debt.
You will pay fees and all of the legal costs paid to take you to court in the first place. You should avoid being sued for nonpayment as the result will be very costly.
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If you are worried that your credit card companies will seize your bank account it is because you know you are behind in your payments.
Only a court judgment can allow a seizure of your funds but if you owe the money, the court will most likely rule in favor of the credit lender.