Editorial Policy

Unpaid credit card lingers in debt 'Twilight Zone'

Erica Sandberg

September 4, 2013

QDear Erica,

I didn't pay my Citibank card, and when I called to pay for it, they said it's been declared charged off. The person I spoke with said she couldn't help me anymore. I asked who could and she said to call back next week because they are selling it to a collection agency but don't know which one yet. That makes no sense to me at all. Do you think she just didn't want to help me? — Bailey

AHi Bailey,

Imagine Rod Serling standing in the corner of your television screen, pointing to an ominous scene unfolding about an old credit card bill — because your credit card debt is now in the Twilight Zone.Ask Erica

Because you haven't dealt with the balance that you owed to Citibank in the correct way, the company did what it needed to do:  take action. While unpleasant for you, it is a sensible decision.

When you first got the credit card account, you agreed to send at least the minimum requested payment for whatever balance you had incurred by a specific date. While you may have complied in the beginning, something happened later and you didn't. You charged with the card, built up a balance and then did not pay. As the months slipped by and the bank continued to receive nothing, I'm sure it tried to reach you and ask you pay up. It happened first by mail, with kind reminder notices, then probably continued with increasingly urgent phone calls. That was the help you were looking for, but you either missed it or ignored it.

After about 180 days of not getting what it was entitled to receive, the bank began the process of removing the obligation from its books. That means it started to look for collection companies that would buy the account. By doing so, it could at least get some of the money that was due. As the representative on the phone told you, this is called a charge-off.

The third-party collector that eventually does purchase the account will then own it. Though it will pick it up it at a discount, it will attempt to persuade you to send the full amount that you owe. The difference between the collection company's purchase price and the amount that you send is its profit margin.

Just which collection agency will your bank use? We don't know yet. There are countless companies that assume such bad debts, so original lenders have their pick. When you contacted Citibank, it was still in decision mode — meaning the account was in limbo.

It won't take long for you to find out who has the honor of trying to collect from you, however. Even if you don't call the Citibank back, you'll be getting a notice from the lucky collection agency. That information will also be on your credit report. The suspense, therefore, will soon be over.

Just as the bank wanted its money, so too will the collector, and chances are they won't be very nice about it. Unlike credit card companies, collection agencies aren't in the lending business, so they don't have to be genial.

When you find out which collection agency you will be dealing with, I strongly suggest that you pay what you owe. It's too late to save your credit rating from the damage that missing payments, a charge-off and collection action have already done, but you can still satisfy the liability. While a collection account on your credit reports is never flattering, a paid-off one looks better than an unpaid one. So pay the balance as soon as you can — and escape any further suspense.

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