What happens if you do not pay back your Credit Card Debt?

Having insufficient financial resources to tame your unrestrained financial spending can lead to some major consequences. Let's take a look at what exactly happens when you miss your credit card payments.

A credit card is not just a piece of plastic, it is a powerful tool that grants you the ability to borrow money in an instant for important personal and business transactions. Having a credit card in your arsenal allows you to spend well beyond your financial capacity. 

For that very reason, it's easy to get tempted and go crazy with your spending when you have a credit card (especially if it's your first credit card). But have you ever thought about what will happen if you can't afford to pay your credit card debt?

Not having enough financial resources to tame your unrestrained financial spending can lead to some major consequences. So just what exactly happens when you miss your credit card payments? Read on to find out.

Step 1: Interest Charges and Late Payment Fees

Credit card companies will usually begin charging you interest the moment you miss a payment or fail to pay enough to cover your balance. Interest and late payment fees can be really sneaky, they present themselves as small little charges on the bottom of your bill and before you know it, BOOM, they've accumulated and grown to a gigantic amount.

It is for that very reason that you should never take interest and late payment fees for granted, because if you do, they will cost you dearly in the long run. Always try to pay the full balance on your credit card bill if you want to avoid getting shot with the interest fee bullet.

There are three tiered interest rates regulated by BNM, namely the 15%, 17% and 18%, per annum interest rates. The longer the period of time that you consistently pay your credit card bills promptly, the lower the interest rate charge incurred. More information regarding this in our Credit Card Tiered Interest Rates Explained article.

In addition to that, you will also incur late payment charges which is usually a minimum or RM10 or 1% of the total outstanding balance, whichever is higher as of the statement date. Late payments are usually capped at a maximum of RM100 per account.

Step 2: Collection Calls and Visits

If the threat of interest and late payment fees do not faze you, then the Bank will begin taking more drastic measures. After 1 or 2 months of not making any payment, you'll begin to receive collection calls/letters and emails from the Bank. The contents of these letters can range from simple friendly reminders to threats of legal action.

If you choose to ignore these letters, then the Bank might send a collections officer to your place of residence to make an inquiry. While the Bank collections officer won't splash paint on your door or perform any of the other harassment activities associated with illegal money lending, they will use stern language to remind you of the consequences of skipping out on payment.

It should also be noted that by this time, it is also likely that your credit card would have been blocked by the Bank as well.

Dealing with collections officers can be intimidating so the best course of action to take is to remain calm and offer a proper explanation to the officer on why you've been missing payment and when you plan on making a payment. Suffice to say, getting angry and/or running away will do nothing to ease the situation. Be responsible and explain yourself.

Step 3: Black mark on Credit Report

When you constantly defer or fail to make payment of your credit card debt then the Bank will put a black mark on your credit report. A credit report is basically a memo on how well the bank can trust you. 

So are credit reports limited to just one bank? NO. Credit reports follow you for life and can be accessed by all banks linked directly to Bank Negara Malaysia through the online Central Credit Reference Information System ( CCRIS). Having a bad experience with one bank can and probably will lead to you getting blacklisted by all Banks. So why ruin your future ability to borrow money? What if you need to take up a mortgage in the future and the Bank declines your application due to your poor prior credit history?

Step 4: Bankruptcy

Finally, if you truly have absolutely no funds available to pay up your credit card bills then the Bank can sue you for the money that you owe. This is usually reserved as an absolute last resort as the court will weigh out your assets and determine whether you are eligible to pay up your debt.

If it turns out that you have an outstanding amount of RM30,000 and above with a default period of at least 6 months, then under Malaysian Law, you can be declared a bankrupt.

A Director General Insolvency (DGI) will then be appointed by the court to administer over your assets in order to settle the outstanding debts. The DGI will also find and investigate all your assets and properties and sell or dispose of them to repay the creditors. In addition, your passport will also be held by the DGI, meaning that you will effectively be barred from leaving Malaysia.

0 comments

Agree or disagree with this post? Questions? You also have your word!

  • Ahmad Farouq Idris

    If i dont pay for past 3 months with debt of RM7,000 interest, can the collector issue a warrant for it?

    Reply
    • RinggitPlus

      Hi Ahmad,

      Each bank has its own procedure and therefore would be best to speak to your financial institution to break down your options.

      Thanks

      Reply
    • Paul

      Hello I got laid off and returned back to Thailand with an outstanding balance of 35,000 Rm on my CC, can the bank stop me from coming back into malaysia and from leaving if I do come back?

      Reply
      • RinggitPlus

        Hi Paul,

        If you have been paying the minimum amount monthly there should be no issues with you leaving and returning to the country.

        However, if the bank has issued you a summon or pending a court issue, there could be stipulations that prevent you leaving the country.

        Thank you.

        Reply
      • Sheikh Shahan

        Hello, What are the consequences if a foreigner who holds a local Malaysian Credit Card leaves the country with an outstanding balance of more than 20K? The reason I'm asking is because my roommate is planning to do this whereas my concious doesn't allow him to do it. I want to make him aware of it so that he doesn't do any such activity.

        Reply
        • RinggitPlus

          Hi Sheikh Shahan,

          If he decides not to settle his debt initially the bank will send him letters to his registered address as a reminder of payment as well as attempt to call him.

          At some point the debt will fall under the collections department and they will issue a court order or summon for him to appear in court. He will then have a problem coming or leaving Malaysia as he could be detained.

          This could affect visa applications for entry into Malaysia and possibly any country that shares the network for visa approvals, which could lead to bigger issues later on.

          Thanks.

          Reply
        • Jen

          Hi, just wanna to confirm. I always pay the minimum amount for my credit card and not pay for the full balance. Will i get blacklisted in bank?

          Reply
          • RinggitPlus

            Hi Jen,

            You are fine if you make minimum payments on your credit card, in accordance to the due date.

            However, we do not recommend you do so as the interest you end up paying long term could be substantial.

            Thank you.

            Reply
          • Melinda

            I owed this bank rm3k+ from my credit card usage and have not pay for 2 mths. Can they use my money in saving acc to pay for the minimum payment? Because they just did that to me without getting my consent.

            Reply
            • RinggitPlus

              Hi melimelicrafts!

              If you have your credit card and your savings account under the same bank, the bank may choose to pay your debts with the funds you keep with them. Remember, they have their own expenses to cover, and if you're late with payments, they're entitled to recoup their losses. It's not illegal, and it's not "taking money without your consent". The term is "setting off". You can read more about that here: http://www.moneysavingexpert.com/banking/setting-off

              Reply
            • Zack

              Hi Sir/Madam,

              i have a credit card with RM11,000 amount of debt which is due for 8 months already but however i have made payment on April. The bank hired the deb collector and then they said will seize my belongings in my current house ? is this possible ? and i have also spoke to the person in charge and he gave me 1 week time to settle half of it ? would appreciate if i can know they can take my belongings for this purpose ?

              Reply
              • RinggitPlus

                Hi Mohans!

                Have you paid your debt completely and in full (plus interest)? If you have, then you must prove this to the bank so they can call off the debt collectors. Once the bank has employed the use of a debt collecting agency, that agency can do things that banks normally won't.

                Reply
              • Dulidali

                If I pay my monthly credit card within due date, but not full payment, but more than min payment, will I be blacklisted? N if I wanna sell my car now (still owing bank 40k) to trade in another car (wil borrow 60k from bank), will I be eligible n approve for it? Thanks

                Reply
                • RinggitPlus

                  Hi Dulidali!

                  We'll answer your questions one by one.

                  Q1: If you've only paid the minimum (plus a little extra) and always on time, then your credit score (a bad one will lead to "blacklist status") depends on how much credit card debt you still have. The more money you still owe the bank via your card, the worse your score might be. As long as you make your payments on time however, your credit score should look alright. We suggest you still check with the bank to be sure.

                  Q2: This one is trickier to answer, but a good rule of thumb is that the more you owe the bank, the less likely they will want to still loan you money. But if you've been a good paymaster, they might still approve your application. Borrowing from a different bank from the one you owe may increase your chances of getting approved. We suggest applying anyway to know for sure.

                  Reply
                • Mak Jenson

                  I owe a bank loan 21k never paid since 2014 till now. They issue a summon base on 22k. I cant paid off my loan. Still have other 3 credit card to settle. And not enough cash flow. What should i do?

                  Reply
                  • RinggitPlus

                    Hi Mak,

                    Looks like you've gotten yourself into quite the financial pickle. Have you consulted with AKPK? https://www.akpk.org.my/
                    We suggest that you do to properly help you manage your finances. They can better help you with this than we can in just one comment.

                    Reply
                  • TC

                    Hi about 12 years ago I applied for a credit card with PB and have an outstanding amount of about RM1000 payable of which I had sent a cheque via mail to settle that amount. It was during that time when I had relocated and had forgot to inform the bank. i have just discovered that I now owe the bank RM50,000+ from interest, and that my debt was sold off to a collection agency. I don't have copies of any letters sent to my old address, and my credit report from RAM and Insolvensi states that I'm not bankrupt or have any legal proceedings or amount owing in my report. Yet I am still receiving bills to pay up my outstanding amount from PB every month. What's happened? I'm not sure how to proceed as I had not made any copies of the cheque or letter mailed to the bank years ago and am hence unsure if they have received it at all. Please advice. Thanks v much. TC

                    Reply
                    • RinggitPlus

                      Hi TC

                      Do you still have the stub from the cheque book? You can cross-check that with the rest of your bank statement dating back 12 years ago which the bank should still have with them.
                      However, if the bank has already sold your debt off to a debt-collecting agency, you may have to talk to them now instead of the bank directly.

                      Reply
                    • Dee

                      hi.. can a bank file for bankruptcy against me if my Credit Card principal is only RM3k but total up to RM67k inc of interest and late charges?

                      Reply
                      • RinggitPlus

                        Hi Dee,

                        A bank can petition to bankrupt you if you owe a minimum of RM30,000. So yes.

                        Reply
                      • Jonathan

                        I defaulted 3 credit cards with three banks total over RM100k. I am surprised that banks do not sue me bankrupt for over 10 years. However, they do use debt collectors to harass me. Fortunately, I lived in a private condo where they can't enter condo without my permission. For your protection from debt collector, don't register your mobile phone under your name because they will track you down with whatever new mobile numbers you registered with all telcos. Yes, with little help from insider, they know all your mobile numbers under your name. Recently I emailed to banks asking them what contact numbers they will call me. When I see incoming call with CLIP feature, I know the call really come from banks, and not debt collectors or any tom dick person who can say they are from bank and want to talk to me. In legal point, I am not obligated to talk to 3rd party like debt collector. You can download app like 'whoscall' which can tell you a lot who the callers are especially debt collector. I came across in local forum site that to declare a person bankrupt, whoever take the action will have to pay RM1000. I am not so sure if this is really implemented. Obviously banks can't afford so they will come with Writ of Seizure to sell your assets in order to have some money to pay to Insolvency Dept. From my experience, don't apply credit cards with local-made banks like RHB, Maybank, CIMB etc. Apply credit cards with foreign banks like Citibank, OCBC, Standard Chartered etc because these foreign banks are not that harassing and not strict. I don't care my credit rating since I am already past 50. At that age, banks also will not loan me money forever. I earn my money from internet where money can go to other person. I tend not to use my own banks to purchase; I borrow someone account to transact. I was stopped by banks' lawyers from asking questions from court's officer when I was asked to go to court for registration of the debt. I regret my action. Don't let fear stop you from asking questions in court or anywhere else. Learn as much as possible about your rights and laws, and don't let debt collectors or banks disturb your soul. Buy books on bankruptcy because it can help you a lot to avoid bankruptcy. Be smart to stay alive. Good luck.

                        Reply
                        • Ng

                          Hi, if my RHB Easy loan not paying more than 3months, will they sue me to bankruptcy??outstadings amount Rm 26,000

                          Reply
                          • RinggitPlus

                            Hi Ng,

                            They can only do so if your debt is RM30,000 or above. By the looks of it, you need to pay up quite soon.
                            We hope this helps!

                            Reply
                          • Stazz

                            Hi, if i failed to pay minimum amounts fr 3 consecutive months. Debt around 10k? Am i blacklisted from leaving the country? If i manage to pay the minimum payment back.. will my card still be blocked?

                            Reply
                            • RinggitPlus

                              Hi Stazz. As long as you pay your minimum payment, you card shouldn't be blocked.

                              As far as you being barred from leaving the country, that won't happen if you're only RM10k in debt. If however, you fail to pay off your student loans or conducted security offences, or unable to pay your debts of at least RM30,000 (would be declared bankruptcy at this point), then you will not be allowed to leave the country.

                              If you still want to check whether or not you're allowed to travel abroad, you can do so here: http://sspi2.imi.gov.my/

                              Reply
                            • fairuz

                              i have credit card with 12000 amount. due for 4 month. but i want to make half payment still the bank did not want to entertain me. then ask me to duel with debt collector. have any chance to do other way?

                              Reply
                              • RinggitPlus

                                Hi, Fairuz. It looks like your bank has already decided to use the services of a debt collector. Typically at this point there's little you can do on your end. You can still however try to appeal to the bank again and see if they change their mind. Alternatively, you can try to transfer your balance to a new credit card with a different bank and pay it off that way.

                                Reply
                              • Pike

                                Hi Jonathan,

                                Good post, and very informative for those who has harassed by the collector can better deal with bank next time.

                                Reply