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Can Credit Card Companies Repossess My Items If I Don’t Pay?



One of the biggest perks to using a credit card is that you can buy an item now and pay for it later. If you need money upfront for a large purchase, you can get what you need and repay it over time. But what happens if you don’t pay off the balance? Will someone knock on your door demanding the products back? In most cases, no, but that doesn’t mean you’re off the hook.

Unsecured Debt vs. Secured Debt

Before we can tackle the topic of repossession from credit card debt, we need to examine two common debt categories: unsecured debt and secured debt. Unsecured debt comes from a line of credit that is not backed by any collateral. Secured debt is ‘secured’ by a tangible item, such as property, a vehicle, a piece of furniture, etc. If you don’t make your car payment for a certain amount of time, your car may be repossessed because a car loan is a secured form of debt. Most forms of credit card debt are considered unsecured, so there is no specific item connected to the debt.

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When you purchase something with your credit card, that does not become collateral for the debt. There is one exception to this rule, and that’s if the card agreement has a security interest clause. We’ll explain more about that later. In the vast majority of cases, your credit card debt remains unsecured. The credit card company is not going to ask for your coffee, combo meal, or gas station candy back if you don’t pay your bill.

What Will Most Likely Happen If You Don’t Pay Your Credit Card Bill

If you miss one or two payments on your credit card, all you’ll incur is a late fee and extra interest. The credit card company will still keep your account open, and you can continue to pay off the debt. After three missed payments (90 days delinquent), the credit card company may close your account and sell the debt to a collection agency. That’s when the fear of repossession may start to kick in.

At this point, you can try to settle your debt with the collection agency or make a payment arrangement for the debt. If you are unable to do this, the collection agency can file a lawsuit against you. If the judgment goes in their favor, you could have your wages garnished, a lien put on your property, your bank accounts frozen, and other possible consequences. The items you bought with your credit card may not be at risk, but you could lose much more along the way.

Worried about liens and garnishments? We’ve got plenty of advice to help you pay off credit card debt and avoid debt collection altogether.

Security Interest Clauses in Credit Card Agreements

Some credit card agreements include security interest clauses, which are essentially terms for repossession. These clauses are most common among store credit cards, where the card can only be used with that specific merchant. The Costco credit card once had a security interest clause that said, “each good you buy using your account secures your entire account balance until that good is paid in full and may be taken from you if you don’t pay on time.” Most clauses are not that clear, but the intentions are the same. Making a purchase with the card turns the item purchased into collateral.

Read your card terms closely and look for any verbiage related to security interest. You can use the database of card agreements from the Consumer Financial Protection Bureau to find your card agreement, if you don’t have access to it otherwise.

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Unpaid Debt Could Lead to a Lien on Your Home or Vehicle

There is a bigger issue at hand than losing credit card purchases for failure to pay. If a judgment is issued against you for credit card debt, the collection agency may issue a lien on your home, vehicle, property, or anything else you own with a title. You cannot sell or refinance this property until the lien is repaid. The lienholder can force you to sell the property in order to fulfill the judgment, but you will only receive whatever the profits are in excess of the lien amount.

It’s important to note that the collection agency doesn’t want your property. Neither does the credit card company you originally had the debt with. They just want their money back, along with applicable court costs and fees. If they issue a lien on something you own, that doesn’t fulfill the debt right away. They’re more likely to garnish wages or settle for a reduced amount so they can recoup their losses quickly.

Installment Agreements for Specific Items (Rent-to-Own, Store Financing, etc.)

If you have an installment agreement for an item, that is a secured debt. The item is collateral for the debt, and the lender can repossess the item if you fail to pay for it. This is most common with rent-to-own furniture or store financing. Let’s say you buy a mattress on a six-month payment agreement but only make three payments. The store or third-party lender can repossess the mattress because you did not complete the installment agreement.

Will Creditors Repossess My Items If I File Bankruptcy?

If you plan to file bankruptcy, you may or may not be able to keep your purchases. It depends on the type of bankruptcy you file and the overall status of your debt. With Chapter 7 bankruptcy, a third-party trustee liquidates your nonexempt assets to pay off as much of your debt as possible. Everything else is forgiven. You can keep one vehicle, one home, and most personal belongings, but additional assets may be sold for debt repayment. The regulations for nonexempt assets vary from state to state.

With Chapter 13 bankruptcy, you develop a payment plan to cover your debts in a 3-5 year period. You make monthly payments to a third-party trustee, and that person disburses funds to your debt collectors. Chapter 13 bankruptcy does not create the instant ‘clean slate’ that Chapter 7 yields, but it protects your property from repossession.

Before you consider filing bankruptcy, look into debt consolidation. You might be able to consolidate credit card debt on a balance transfer card, or get a loan to cover your existing debts. This loan turns your old debt into new debt, which buys you time to avoid repossession. As long as you maintain your credit card payments or loan payments, you can keep your property and rebuild your credit.

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How to Manage Your Credit Card Debt

The fact that you’re reading this shows you might be in over your head with credit card debt. That’s alright. You still have options left. Whether your financial situation changed or your just weren’t smart with your spending, you can take small steps to get out of credit card debt.

  • Analyze your monthly budget, including everything you make and everything you spend. Take a hard look at your finances and get a grasp on how much money you’re spending each month. It may be time to make some sacrifices to devote more money to debt repayment. At minimum, this will give you an idea of how much you can pay on your credit cards and how quickly it will take to pay off credit card debts. See: How to Set a Monthly Budget
  • Choose one credit card to pay off first. This could be the card with the smallest balance, the highest interest rate, or whatever card you want. The goal here is to get you motivated about paying off your debt. Make minimum payments on all your cards, but pay extra on your target card each month. Repeat this until you’ve paid off the one card completely.
  • Use the money from your first card to pay off the second card. If you were paying $50 a month toward your first card and $15 a month on your second card, pay the full $65 to your second card now. This will pay off your debts even faster, and you can use the momentum to get out of credit card debt.
  • Avoid unnecessary purchases. Think carefully about any purchase you make with your credit card, especially if it’s not a necessity. Every $5 charge adds up, and that’s money you could use to become debt free.
  • Ask for a lower APR. After six months of on-time payments, contact your credit card company to request a lower interest rate. Most cardholders are successful with this request, and a lower interest rate means lower debt over time. In a worst case scenario, they say no and you maintain your current interest rate.
  • Learn from past mistakes. Review the decisions that led to your current debt situation. What could you have done differently? What habits do you need to break? You cannot undo the past, but you can prevent a repeat in the future.

If you’re trying to rebuild your credit, consider a secured credit card or a credit card for bad credit. Be sure to make your monthly payments on time each month. Better yet, pay off your balance each month so your debt doesn’t accrue interest. Keep up with these smart money habits, and you’ll be on your way to a fruitful financial future.

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Bad Credit

3 credit habits that you need to break



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Are you using your credit card responsibly? Or do you have a few bad habits? Take a look at three common bad habits that people have with their credit cards and the best ways to stop doing them.

Habit 1: Pushing the limits

The first bad credit habit is pushing your outstanding balance close to its limit. What’s wrong with that? The first problem is that you’re giving yourself a larger debt load to contend with every month — one that accumulates interest the longer that it sits. It could be very difficult to pay down, and it could even lead to you maxing out your card.

The second problem with this habit is that it leaves you vulnerable to emergencies. You’ve taken up the majority of your available credit, so you can’t depend on it for unexpected payments. What if you need to pay for an urgent repair and there’s not enough room on your card? What can you do?

To avoid that difficult situation, you could apply for an online loan to help you cover the emergency costs and move forward. See how you can apply for an online loan in Ohio when you have no other safety nets to fall back on. It’s important that you only turn to this solution when you’re dealing with an emergency. It’s not for everyday purchases or small budgeting mistakes.

In the meantime, you should try your best to keep your credit utilization at 30% or lower — this means that your balance should be below the halfway point of your limit.

Habit 2: Paying the minimum

You pay your credit card bills on time, but you only give the minimum payment. While this habit can stop you from racking up late fees and penalties, it can still get you into hot water if you’re not careful.

Only paying the minimum for your bill will make it very difficult for you to whittle down the balance, especially when you’re continuing to charge expenses on your card. You’re only taking $20-$25 off a growing pile.

So, what can you do? If you’re paying this amount by choice, stop it — you’re only making things harder for yourself down the line. If you’re paying this amount because you don’t have any more funds, look at your budget to see whether you can cut your monthly costs to get more savings and use them to tackle your balance.

Habit 3: Using it for every single expense

You don’t need to put every single expense on your credit card. Your morning coffee? Your afternoon snack? Putting these small, everyday expenses on your card is a habit that can make your balance climb quickly.

You also don’t want to put some very important expenses on there, like mortgage payments. For one, these payments are large and will take up a significant amount of your credit. Secondly, if you need to use a credit card to make these payments on time, you need to reinvestigate your budget to see whether you can actually afford your living space.

So, what you should you do? Use a debit card, cash or checks to pay for the items above. Only put expenses on your credit card that you’re positive you can pay off in a reasonable timeframe.

Don’t let these bad habits drag you down and get you into financial trouble. Break them now, before it’s too late.

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Free credit reports have been extended; here’s why it’s important to check yours regularly



Checking your credit could save you from identity theft. (iStock)

Typically, you’d be able to check your credit report — at least for free — just once annually through each of the three major credit reporting agencies. But thanks to the coronavirus pandemic, credit reports are now more accessible than ever.

Credit reporting companies Equifax, Experian and TransUnion are all offering  free credit reports weekly through April 20, 2022.

The move means better insight into your financial health during what, for most, is an economically challenging time. According to experts, it might also be a time that’s ripe for at-risk personal information and identity theft, too — even more reason consumers should be checking their credit on the regular.


Have you checked your annual credit lately? If not, here’s what you need to know about these free nationwide credit reports and how to get them. If you’re not sure where you fit on the credit score spectrum, you may want to start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.

Free credit reports for all?

The nation’s three credit bureaus initially started offering free weekly credit reporting last year, just after the pandemic began. In early March, they announced they’d extended the offer for another year, this time through April 20, 2022.

To request your free credit reports and access copies, you can go to and provide some basic information to verify your identity (things like your date of birth, Social Security Number, and address).

Once your report is ready, you should see a detailed list of all open and closed accounts in your name, your payment history, recent credit activity and more.


Protect yourself from identity theft

There are many reasons why checking your credit activity is important, but chief among them? That’d be the prevalence of data breaches in today’s world — not to mention the risk of identity theft they come with.

“In the past, it was perfectly acceptable for people to check their credit history once a year, but now with security breaches happening on a regular basis, consumers should be monitoring their credit more closely than ever,” said Clint Lotz, president and founder of, a predictive credit technology firm.

Lotz said the Equifax breach — which exposed over 147 million Americans’ personal information in mid-July 2017 — is the perfect example of why watching your credit report is important as far as identity theft protection goes. The pandemic, he said, adds an extra layer of risk to things.

“It took them [Equifax] months before they even realized they had been hacked, and considering that they hold files on hundreds of millions of Americans, it’s fair to say that many identities were stolen by the time they caught up to it,” Lotz said. “With many of us worrying about very serious issues not related to our credit, it’s a prime time for that stolen data to be put to work by bad actors in slow, methodical ways and in the hopes that nobody notices it.”

More reasons to check your credit

Checking your credit health often isn’t just good for detecting fraud alerts and to protect your identity, though. You can also monitor your report for errors — things like inaccurately reported late payments, for example — and then dispute those with the credit bureau.

If the error gets corrected, it could improve your credit score and make a jump from bad credit to a FICO score that’s more favorable. Not sure of your credit score? Head to Credible to check your score without negatively impacting it.


You can also use your credit reports and scores to monitor your financial habits — like the timeliness of your payments or how much debt you have left to pay off. Both of these factors can play a big role in your score, as well as how likely you are to get approved for loans, credit cards and other items.

“If you’re taking out a loan, getting insurance or even applying for a new job, checking your credit will allow you to see an overview of what would be seen by others looking at your credit,” said Leslie Tayne, a debt relief attorney with the Tayne Law Group. “Staying up-to-date on your credit reports and information allows you to know exactly where you need to improve.”

Want to be sure your credit is stellar before applying for a loan or insurance policy? Consider Credible’s partner product Experian Boost, which lets you use positive payment history on utilities, streaming and other bills to improve your credit score.

Set up a monitoring service, too

Though checking your credit reports manually is smart, you should also consider signing up for a credit monitoring service. These consumer financial services check your credit information and score regularly and alert you of any changes.


If you’re interested in monitoring your credit or improving your score, head to Credible and learn more about how Experian can help. You can also use Experian Boost to get credit for on-time bill payments.

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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Do Personal Loans Have Penalty APRs?



Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

When you make your credit card payment late, you’re often subject to late fees and a penalty APR, which is a temporary spike in your interest rate.

The Blue Cash Preferred® Card from American Express, for instance, has a 13.99% to 23.99% variable APR, but the penalty APR is a variable 29.99% (see rates and fees). Penalty APRs usually last for at least six months, but card issuers often reserve the right to extend them — especially when you continue making late payments. A look at the terms for the Citi® Double Cash Card show us that the “penalty APR may apply indefinitely.”

Penalty APRs are certainly not a trap you want to fall into, but it’s not something you usually have to worry about if you have a personal loan. Personal loan lenders can, however, charge late fees upwards of $39 per late payment. Whether your loan charges late fees all depends on how good of a loan you qualify for, and that comes down to your credit score, borrowing history and ability to make your payments.

Personal loans also tend to charge lower interest rates than credit cards, too. The average personal loan interest rate for two-year loans is currently 9.46% according to Q1 2021 data from the Federal Reserve, compared to 15.91% for credit cards.

Typically, interest rates for personal loans range between roughly 2.49% and 24%, but personal loans for applicants with bad credit can come with even higher APR — so do your research before applying.

Other common personal loan fees include:

  1. Interest: The monthly charge you pay to borrow money
  2. Origination fee: A one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs
  3. Late fee: A one-time fee charged for each payment that you fail to make by the due date or within your grace period
  4. Early payoff penalty: A fee incurred when you pay off your balance faster than planned (because the lender misses out on months of expected interest payments)

As you can see, personal loans can be costly, even without a penalty APR. It’s obviously best to avoid paying extra fees whenever possible. That’s easier to do when you have a good to excellent credit score, since you’ll qualify for better loan options.

Select has a free tool to help match you with personal loan offers without damaging your credit score.

None of the loans on our best personal loan list charge origination fees or early payoff penalties, but some may charge late fees.

Our top picks for best personal loans

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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