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Aug 16 2010 12:00AM

Question


I am 66 years old and now single. I have two credit cards which total more than $5,000. My minimum payment has been only $47 a month as I can’t afford anymore than that. Since I can’t pay them off in my lifetime, should I just not pay anything?

Answer


“Before you stop paying them, make an attempt to contact them and explain your situation,” said FPA member Neal Watson, CFP®, of Fleming Watson Financial Services, LLC. “If you are unable to pay them off, or even make the monthly payments tell them, and see how they wish to proceed. Are they willing to work with you either directly or through a third party agency such as Consumer Credit Counseling Service (CCCS).

“There are a couple of negative ramifications to not paying your monthly credit card bills. First, it will reflect negatively on your credit report and credit score. This only matters if you are applying for loans in the future. Second, they will likely turn it over to collection, which means the collection agency will make many attempts to call you. You may feel harassed at some point. It is possible they could take legal action (lawsuit) against you. This can make things more complicated and potentially more expensive (lawyers get involved at this point). 

“Please try to contact them directly first and see what they will do to work with you before it escalates to collection or beyond. The next step — if you haven’t already taken it — would be to cut up all remaining credit cards you have and quit using them all together. Pay cash or use a debit card for everything you purchase.”

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