I’d like to start by saying, I love being part of the personal finance community! As an active member int he community, I am often asked challenging questions and even better, I am sometimes asked to write challenging articles. The types of articles that require a bit of research and hours of concentration. Recently, I was asked to write one of these articles. An article that would address a legal question about credit cards. Once the article was done, I thought, “I should write an article about commonly asked questions about credit cards…let’s check out my email!”. Believe it or not, the legal question that I addressed was a pretty frequently asked one. I also found another 2 questions that were asked at least once per week! Here are the credit card questions that I’m asked the most and the best answers that I can give:
Question #1: Can Credit Card Debt Cause Me To Be Put In Jail?
These days, credit card debt is something that millions of consumers are dealing with. But, can you be taken to jail if you don’t pay your monthly payments? No, there is no law that actually requires you to pay your credit card bills. However, it is in your best interest to make and make sure that it is on time. While non-payment won’t put you in jail, it will cause your credit score to fall! Your credit score controls your interest rates, as it goes down, you become more of a risk to lenders and your rates go up. If you go long enough without payment, you can be taken to court for your balance! Once a judgement is made against you, it stays on your credit report until it is paid off and in some states, your wages can be garnished. But, you can not be taken to jail!
Question #2: What Do You Think About Balance Transfer Credit Cards?
The answer to this question really depends on the person that is asking the question. Generally, this question is coupled with key information that helps me to make the best decision. If the consumer is dealing with incredibly overwhelming debts and is having a hard time making their monthly payments, I would strongly suggest considering credit card hardship programs. However, if the consumer seems to have good credit scores and is not facing overwhelming debt, I often say I think that they are great. This is because they allow you to transfer your balances from high interest rate accounts to low rate accounts. In many cases, consumers have used balance transfer credit cards to consolidated debts and save thousands of dollars in interest. However, before choosing this option, I would strongly suggest reading my most recent series, a guide to understanding balance transfer credit cards.
Question #3: Is My Lender Required By Law To Inform Me Of Debts Being Sent To Collections?
Could you imagine a debt that you forgot about being sent to collections without you being informed? That could be devastating to your credit score! But is there any law that requires lenders to inform you? Well, no there isn’t. However, it is not in the lender’s best interest to sell your debt to a collections agent without trying to contact you. The truth is, when they sell your debts, they sell them for pennies on the dollar, often times losing hundreds or even thousands of dollars along with all interest that would have been paid on that debt! In most cases, before your debts are sent to collections, you will not only be contacted, you will be bombarded with contact by your lender!