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Credit card/interest being cancelled

  • 25-01-2015 6:07am
    Registered Users Posts: 274 ✭✭

    Is it correct that if you don't pay your credit card bill for 3 months, that they stop charging you interest from there on in? As it can be seen that paying the bill is difficult?


  • Registered Users Posts: 69 ✭✭BazzaDP

    Not sure where you've got that idea from! It's not true.

    Look. what people need to realise is that banks and credit card companies, no matter what you think of them, are a business like anything else. You borrow money off them and pay it back with interest. That's how they make most of their money.

    It's usually not a good business model to lend for free, or to scrap outstanding debt completely just because you're stuggling.

    Restaurants won't offer to charge you for just the price of the ingredients (or less) just because you can't really afford the full price of what you ordered.

    Also, harsh as it may seem, your struggles don't magically make money disappear. They lent you the money (and we can get into the fact that they possibly shouldn't have if you want) and they need it back - with interest.

    Saying that, financial institutions aren't stupid (despite what people think) and will look at what's best for them. This means if you're unlikely to pay back what you owe, they can look at what to do about that. Is it worth giving a longer time to pay back - that way they get their money back but it just takes longer than originally agreed? Or is it worth scrapping the interest completely (like you are suggesting), so they at least get their money back even if not the interest? Or will it cost more to chase you, so maybe they should give up completely on it or sell it on to a debt collector for a fraction of what it's worth so they stop sending good money after bad and at least get something back on it?

    These are extreme cases and are not decisions taken lightly. It would need to be in the companies best interest to do this - i.e. is the alternative that you go bankrupt and they will lose it all? However they will not just offer to lose out here or make it easy. This has to be exceptional and therefore has to be a bit difficult.

    If you are struggling then you could contact the credit card company and see if they will offer a repayment plan with reduced rate but do not be surprised if they don't and don't go in expecting it. 3 months isn't very long to be behind. They will also likely freeze your card for new payments (no bad thing if you are struggling as credit card debt is very expensive) and this may affect future ability to get credit (including a mortgage if you want it later in life).

  • Closed Accounts Posts: 1,814 ✭✭✭dobsdave

    ash777 wrote: »
    Is it correct that if you don't pay your credit card bill for 3 months, that they stop charging you interest from there on in? As it can be seen that paying the bill is difficult?

    As per the reply above, they will continue to add interest and penalties for non payment etc.
    If you are having difficulties paying back, contact them and they may agree to a payment plan.
    They will probably ask you for a financial statement, detailing every expense you have.

    btw, where did you get the 3 month story?

  • Administrators, Business & Finance Moderators, Society & Culture Moderators Posts: 16,919 Admin ✭✭✭✭✭Toots

    I don't know where you heard that, but it's categorically untrue. They will continue to charge you interest on the outstanding balance until the balance is cleared in full. If you're having trouble making repayments, then you need to contact your credit card provider ASAP and come to an arrangement with them for either reduced repayments, or perhaps converting the balance into a loan over a longer period of time, so that you'd be able to pay back a reduced amount and the interest won't be as high as a credit card.

    Just not paying your bill for 3 months and not contacting them at all is about the worst thing you could possibly do. The only way they'll see that making your repayments is difficult is if you actually contact them and tell them so. If you just one day decide to stop paying it, they'll have no idea of the reasons, they could assume you've just decided not to honour your debt/have left the country. There's even a type of fraud that involves accessing credit, maxing it out, and then disappearing. It's called bust-out fraud.

    I'm not accusing you of doing this, by the way. What I'm trying to say is that if you just stop making payments and they hear nothing from you, they won't just automatically assume you're in financial difficulty. They'll probably try various methods of contacting you - most likely by phone and by letter. If they hear nothing back from you, and you're ignoring their correspondence, your account is considered 'delinquent' and could/will pass on to their legal department. Then the next thing you know is you'll be getting letters in the door from their solicitor.

    Numerous times in work, customers have arrived in with a letter they received from the bank's solicitor and decide to pay off their card. Usually if I get chatting to them, it's always the same story - no, their address and phone number haven't changed, yes they were getting the letters but just binning them, yes they knew they'd maxed out the card and hadn't made any repayments. However, the vast majority got a huge shock when the solicitor's letter arrived, and they seemed to genuinely thing that if they just ignored it, the bank would just write it off, and they'd never have to pay it back!