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FAQ: Answers to Top Credit Card Debt Questions

Debt.com answers the most common questions about credit card debt.

Welcome to our comprehensive credit card debt FAQ

Credit cards aren’t just useful these days – they’ve become all but necessary. From shopping online to making travel reservations, there’s plenty of stuff that’s a lot easier if you have a credit card handy. Not only that, but they also provide one of the easiest ways to build and maintain a solid credit history, so you can do things like rent property or even get that job you want.

But if you’re going to have credit cards, it’s essential that you really understand exactly how they work and what it takes to manage the debt. This is where an FAQ can come in handy, because if you have a question about your credit cards, chances are someone else has already had that question, too.

So we’ve scoured the web to find those all-important credit card debt questions, then we’ve gone to our experts to get the best answers possible. If you can’t find what you’re looking for, why not ask our experts directly, or call 1-888-503-5563 to talk to someone now.

Tired of struggling to pay off credit card debt on your own? Talk to a certified consumer credit counselor to find relief now.

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Q:
Can Social Security be garnished for credit card debt?

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In most cases your Social Security benefits should be protected from garnishments from debt collectors. However, there are some rules you need to follow to ensure your Social Security checks don’t get garnished. First, understand that a collector or creditor must get a civil court judgment to garnish any money from your wages or bank accounts. But even then, they must leave at least two months’ worth of Social Security income in the account if the court allows them to garnish. However, if you have more than two month’s of benefits in the account, you could be at risk of losing some of it. The good news is that there are steps you can take to protect your benefits so you’re not left high and dry.

Learn how Social Security benefits are protected and how garnishment can occur »

Q:
Can you go to jail for not paying credit cards?

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No. Debtor’s prison hasn’t been a thing in the U.S. since the 1800s, and yet there are plenty of collectors out there today that threat people with jail time if they don’t pay. But the truth is that credit card debt is a civil debt, which means although a collector can sue you in civil court, you can’t face criminal charges, including prison. So, you can’t go to jail just because you don’t pay a credit card bill. In fact, if a collector threatens you with an arrest, they’re the ones breaking the law. They violate the Fair Debt Collection Practices Act (FDCPA), which means you can sue them in civil court now for collector harassment.

Learn more about where the myth of jail time for credit card debt comes from and what you can do when a collector tries to scare you into paying »

Q:
Does debt consolidation affect buying a home?

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If you’re planning on buying a home, eliminating credit card debt through debt consolidation should make it easier to qualify. In most cases, debt consolidation should have a positive effect on your homebuying aspirations. But there is some potential as you consolidate that you could hurt your credit score or increase your debt-to-income ratio. Either of these things could make it harder to get approved for a mortgage at the lowest interest rate possible. So, you want to make sure that you understand these risks, so you can take the right steps to support your goal of buying a home.

Understand how debt consolidation affects your ability to get mortgage approval »

Q:
How long do I have to pay off a credit card balance?

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Credit cards are revolving debt, meaning there’s no set term that determines how long you have to pay off your balance. As long as you meet your minimum payment requirements, your creditors will be happy. But that doesn’t mean that you should let your credit card balances linger. It’s in your best interest to pay off your balances as quickly as possible to save money and minimize the risk of debt problems.

Of course, this flexibility with revolving debt payments only applies if you keep your account current. If you fall behind, then the clock starts on how long you have before the creditor charges off your account and sends it to collections. You generally have between 6-9 months to catch up before your account goes to collections. And there are some other milestones along the way that you definitely want to avoid, such as when penalty APR applies.

Get a detailed look at how long you have to pay off a balance »

Q:
Should I use a 401(k) or IRA to pay off credit card debt?

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Tapping your retirement accounts to pay off credit card debt isn’t do yourself any favors. You can delay your retirement or you may not be able to retire at all. And you’re not just losing the money you take out of your 401(k) or IRA. You’re also losing the growth you would have enjoyed had you not taken the money out of your account. In general, you want to leave the money in your retirement accounts be, so it will be there when you need it during retirement. And the older you get, the more imperative it is to leave your retirement accounts alone.

Our experts explain why tapping retirement accounts to pay off debt is a bad idea »

Q:
What happen if I stop paying my credit cards?

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Whether you miss a payment by accident or stop paying intentionally, there are some definite consequences when you don’t pay your credit cards. A late payment won’t show up on your credit report unless it’s missed by more than 30 days. Penalty APR usually gets applied after 60 days of nonpayment and you must make 6 consecutive payments to restore your original rate. Depending on the credit card company, you have about 6-9 months before the creditor will freeze your account, charge it off and send it to a collector. Once that happens, you could face legal action in civil court, which can lead to wage garnishment and worse.

See what happens to a debt from the day it’s late until the statute of limitations expires »

Q:
Who is responsible for deceased parents’ debt?

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Some people fear that when a loved one dies, their debt passes down to their inheritors, so if your parents died with high unpaid credit card balances, that they become your responsibility to pay. But the truth is that credit card debt can’t be inherited. Credit card companies can make claims on the estate when someone passes away, but once the estate is settled, creditors don’t have any claim on your inheritance and they can’t come after you for any balance still owed. But if you’re the executor of your parent’s estate, then it may be up to you to inform the credit card company that your parent is deceased.

Learn what happens to outstanding credit card balances when a loved one passes away »

Q:
Which credit card should I pay off first?

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If you’re carrying several credit card balances over every month, you need to make an efficient plan to pay them off. You may know that you can take extra cash to make bigger monthly payments, but what you may not know is the most cost-effective way to use that extra cash. Instead of putting more money toward all the payments you have, you need to focus on paying off one debt at a time. If you want to save money, then you start with the balance that has the highest APR. On the other hand, if you don’t have a lot of extra cash flow, then you may be better off starting with the lowest balance first.

Learn how to decide which credit card you should pay off first »

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Article last modified on November 14, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: FAQ: Answers to Top Credit Card Debt Questions - AMP.