When your credit card is delinquent, a predictable chain of consequences unfolds over about six months: a late fee the day after your due date, a penalty interest rate around 60 days in, credit-report damage at 30 days and worsening every 30 days after that, account closure by 60 to 90 days, collections around 90 to 120 days, and a charge-off at 180 days. After that, the debt can be sold, sued on, and, if a court enters a judgment, collected through wage garnishment or a bank levy. The timeline is largely the same across issuers because federal rules drive most of it, which means you can tell where you stand and what’s coming next.
The First Missed Payment: Late Fees and Penalty APR
The first hit is a late fee added to your balance the day after you miss the due date. Under Regulation Z, issuers can charge up to $32 for a first late payment and up to $43 if you miss a second payment within the next six billing cycles. These safe harbor amounts are adjusted each year for inflation.1eCFR. 12 CFR 1026.52 – Limitations on Fees The CARD Act requires the fee to be “reasonable and proportional” to the violation.2Cornell Law School. Credit Card Accountability Responsibility and Disclosure Act of 2009
Once your payment is 60 or more days overdue, most issuers impose a penalty annual percentage rate on top of the fee. Penalty APRs commonly reach 29.99% and apply to both your existing balance and new purchases. Federal rules allow this increase only if the issuer sends advance notice explaining why your rate is going up and telling you that the penalty rate will end after six consecutive on-time minimum payments.3Consumer Financial Protection Bureau. Regulation Z 1026.55 – Limitations on Increasing Annual Percentage Rates, Fees, and Charges The jump from a standard APR of 20–24% to a penalty rate near 30% meaningfully accelerates how fast your balance grows.
Day 30: The Damage Hits Your Credit Report
Your issuer does not report a late payment the moment you miss the due date. A payment generally is not reported to the credit bureaus until it is at least 30 days past due.4Experian. Can One 30-Day Late Payment Hurt Your Credit? Bring the account current before that mark and your credit file stays clean. Miss it, and the issuer reports the delinquency to one or more of Equifax, Experian, and TransUnion.
How much your score drops depends on where it started. Someone with a clean history and a score in the upper 700s can lose roughly 60 to 80 points from a single 30-day late mark. Someone who already has blemishes may lose closer to 20 to 40. From there, the issuer keeps updating the bureaus in 30-day steps: 60 days late, 90, 120. Each step signals greater risk to future lenders.
Under the Fair Credit Reporting Act, late payments and other adverse items can remain on your report for up to seven years from the date the delinquency first occurred.5Office of the Law Revision Counsel. 15 US Code 1681c – Requirements Relating to Information Contained in Consumer Reports The score impact fades over time, but anyone pulling your report during that period will see the record.6Consumer Financial Protection Bureau. How Long Does Information Stay on My Credit Report?
60 to 90 Days: Your Account Gets Frozen and Closed
As you fall further behind, the issuer moves to limit its own risk. The first step is usually freezing your credit line so you cannot make new purchases or take cash advances. Rewards you have accumulated, whether cashback, points, or miles, may be frozen or forfeited under your cardholder agreement.
If the delinquency continues past 60 to 90 days, the freeze typically turns into permanent closure. A closed account generally cannot be reopened, even if you later pay in full. The closure itself adds another negative mark to your credit report, and losing that available credit can raise your overall credit utilization ratio and push your score down further. Your legal obligation to repay the balance continues either way.
90 to 120 Days: Collections Begins
Collection efforts run in two phases, and the rules that govern each are different.
Your Card Issuer’s Own Recovery Team
In the first phase, your issuer’s internal recovery team contacts you by phone, letter, email, and sometimes text. This starts shortly after you miss a payment and continues for roughly 90 to 120 days. A point many people misread: the Fair Debt Collection Practices Act generally does not apply to your original creditor collecting its own debt. The statute defines “debt collector” in a way that excludes officers and employees of a creditor collecting in the creditor’s own name.7Office of the Law Revision Counsel. 15 US Code 1692a – Definitions Other federal and state consumer protection laws still apply, but the FDCPA’s specific limits on when and how often a collector can contact you have not kicked in yet.
Third-Party Collection Agencies
If internal efforts fail, the issuer usually hands the account to a third-party collection agency, either paying it a percentage of what it recovers or selling the debt outright for a fraction of the balance. This transition typically happens around 90 to 120 days of delinquency. Once a third-party agency is involved, the full protections of the FDCPA apply. The collector cannot harass, threaten, or deceive you, and it must send you a written validation notice within five days of first contact. That notice must include the amount of the debt, the name of the creditor, and a statement that you have 30 days to dispute the debt in writing.8Federal Trade Commission. Fair Debt Collection Practices Act
Send a written dispute within that 30-day window and the collector must stop collection activity until it verifies the debt. This right matters most when a debt has been resold, since documentation errors are common in the debt-buying industry.
Day 180: The Charge-Off
When a credit card balance goes unpaid for 180 consecutive days, federal banking regulations require the issuer to charge off the account. That is an accounting step: the bank reclassifies the debt from an active asset to a loss on its books.9Office of the Comptroller of the Currency. OCC Bulletin 2014-37 – Consumer Debt Sales: Risk Management Guidance10FDIC. Revised Policy for Classifying Retail Credits A charge-off is not forgiveness. You still owe the full balance, and the creditor or a debt buyer can keep trying to collect.
The charge-off creates a separate negative entry on your credit report that remains for seven years from the date you first became delinquent, the same rule that applies to late payments.5Office of the Law Revision Counsel. 15 US Code 1681c – Requirements Relating to Information Contained in Consumer Reports After the charge-off, the creditor commonly sells the account to a debt buyer for pennies on the dollar. That buyer becomes the new owner and can pursue collection or file a lawsuit.
Lawsuits, Judgments, Garnishment
The most aggressive step a creditor or debt buyer can take is filing a civil lawsuit. It starts when you receive a summons and complaint identifying the plaintiff, the amount owed, and the deadline for your response. That deadline varies by jurisdiction but is typically 20 to 30 days. Miss it and the court can enter a default judgment against you, giving the creditor enforcement tools without ever hearing your side.
A judgment opens two main collection methods:
- Wage garnishment. A court order directs your employer to withhold part of each paycheck. Federal law caps garnishment for consumer debt at the lesser of 25% of your disposable earnings or the amount by which your weekly disposable earnings exceed 30 times the federal minimum wage ($7.25 per hour, making the protected floor $217.50 per week). Some states set lower caps or prohibit consumer-debt wage garnishment entirely.11Office of the Law Revision Counsel. 15 US Code 1673 – Restriction on Garnishment
- Bank account levy. A court order lets the creditor seize funds directly from your checking or savings account. The amount that can be taken and any exemptions vary by state.
These continue until the judgment, including court costs and post-judgment interest, is fully satisfied.
Defenses Worth Raising
Getting sued does not mean you automatically lose, especially when the plaintiff is a debt buyer rather than your original issuer. Two common defenses:
- Expired statute of limitations. If the state deadline to sue on the debt has passed, you can raise it as a defense and the case should be dismissed.
- Lack of standing. When a debt has been sold, sometimes several times, the current owner must prove it actually owns your specific account. Without a clear chain of sale documents, the debt buyer may not have legal standing to sue.
Responding within the deadline, even with a simple written denial, prevents a default judgment and forces the creditor to prove its case. Many consumer debt lawsuits go uncontested, which is why default judgments are common.
How Long the Debt Can Be Sued On
Every state has a statute of limitations that restricts how long a creditor can file suit to collect credit card debt. The deadlines range from 3 to 10 years in most states, with a small number allowing as long as 15. Roughly 6 years is the most common. The clock generally starts running from the date of your last payment or the date the account first became delinquent, though the exact trigger varies by state and can depend on whether the court classifies your credit card agreement as an open account or a written contract.
An expired statute of limitations does not erase the debt. You still owe the money, and the creditor can still ask you to pay. What it prevents is a successful lawsuit. Be careful about making even a partial payment on very old debt, because in some states a new payment can restart the clock. If you are not sure whether the deadline on a particular debt has passed, consult a consumer law attorney in your state before paying or acknowledging anything.
If the Debt Is Later Forgiven, Expect a Tax Bill
If a creditor, collection agency, or debt buyer cancels or settles your debt for less than the full balance, the forgiven amount may count as taxable income. Any entity that cancels $600 or more of debt is required to file Form 1099-C with the IRS and send you a copy.12Internal Revenue Service. About Form 1099-C, Cancellation of Debt You are expected to report that amount as income on your return for the year of the cancellation.
One important exception: you can exclude the canceled amount from income to the extent you were insolvent immediately before the cancellation. Insolvent means your total liabilities exceeded the fair market value of all your assets, including retirement accounts and other property creditors could not seize. You can exclude the smaller of the canceled amount or the amount by which you were insolvent. IRS Publication 4681 includes a worksheet for the calculation. Debt canceled in a Title 11 bankruptcy case is also excluded from income under a separate provision, but you cannot use both exclusions for the same debt.13Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments
What You Can Do at Any Stage
Contacting your card issuer early gives you the most options. Many issuers offer hardship programs, sometimes called forbearance or loss mitigation, that can temporarily reduce your interest rate, lower your minimum payment, or let you postpone payments for a set period. Terms depend on your income, how much you owe, and what you can realistically pay. The CFPB recommends asking for written confirmation of any alternative repayment arrangement before you agree to it.14Consumer Financial Protection Bureau. Need Help With Your Credit Card Debt? Start With Your Credit Card Company
If the debt has already gone to collections, you still have rights. Dispute the debt in writing within 30 days of the collector’s validation notice, negotiate a lump-sum settlement for less than the full balance, or ask a nonprofit credit counseling agency about a structured repayment plan. If a settlement results in $600 or more of forgiven debt, remember that the forgiven amount may be reported to the IRS as income.