Money Management

If you stop making credit card payments, you will incur added interest costs, late fees, and other consequences. Read on to find out more. 

When you charge purchases on a credit card, you must pay them back. Ideally, you will repay your card balance in full each month. If you can’t do that, you’re still required to make at least a minimum payment on your cards.

If you don’t send the required minimum amount out of your bank account to your card issuer, you can face serious consequences. Here’s what happens if you stop making your credit card payments.

1. Your interest rate could go up

If you stop paying your credit card, you’ll be in violation of your card’s terms of service. This can trigger a penalty APR, which can send your interest rates skyrocketing. In fact, a penalty APR is often around 29.99%.

When your credit card interest rate goes up, you will be charged more on your outstanding balance. Your debt will become even more difficult to eventually pay back. More of each payment will have to go toward reducing your interest rate, and you’ll pay more interest over time.

2. You could get hit with late fees

Credit card companies sometimes charge as much as $41 in late fees when you miss a payment. In some cases, you may be charged this amount when you miss your payment even by just a few hours.

If you are late multiple times, these penalty fees will add up. But even a single late payment can cost a lot. You’ll need to check with your card issuer to find out the exact amount you could end up owing just for being late — on top of your regular balance, of course.

3. You could damage your credit score

When you are 30 or more days late paying your balance, your credit card issuer is typically going to report the missed payment to the credit reporting agencies. A record of late payments is going to reduce your credit score.

In fact, if you previously had good credit and you made just one late payment, your score could drop by as much as 110 points, even if you are only 30 days late. The impact will be even worse if you keep missing payments or your missed payments become 60 days behind, 90 days behind, or more.

READ MORE: How Does a Late Payment Affect My Credit Score?

4. Your account could go to collections

Finally, you could find yourself with an account that is in collections. Generally, once you are about 90 to 120 days behind, your card issuer will charge off your account and determine it is no longer likely to recover the money. At this time, you can be sent to collections.

The charged-off account will show up on your credit report, and the debt collectors will now take steps to try to cover the unpaid balance due. This could include having debt collectors contacting you, or even potentially filing a lawsuit against you.

If you are sued and you lose, you’ll get a judgment against you that could be enforced by the court by putting a lien on your property or garnishing your wages.

These are all serious consequences, so try to make at least the minimum payments on your credit cards or look into options such as a balance transfer or loan refinance that could make payments more affordable. If you can’t do that, reach out to your creditors to find out what your options are. There may be a better solution than just stopping payments and dealing with the damage.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Before you hire someone, you want to make sure they are a good fit for your organization. Read on for five interview questions to ask to help you decide. 

Around 80% of small businesses do not have any employees. But, sometimes as a business owner you will need to bring in some extra help. Hiring an employee can allow you to scale up so you can provide more goods and services and, ideally, grow your business bank account balance.

You want to make sure you hire the right person, which can be hard to do if you’ve never brought an employee on board before. To help you find the right staff member to add to your team, be sure to ask these five important interview questions.

1. Have you ever worked with a startup before?

Working at a brand-new company that is just getting off the ground is different than working at an established business. Your first employee will likely be helping to establish their own role within your organization and will play a key part in helping you develop your company culture.

Hiring someone who has worked in a startup in the past and who has an understanding of what it takes to succeed in a growing business can be a big benefit. While a lack of startup experience shouldn’t necessarily be a dealbreaker if you find a candidate who is otherwise perfect, this is still something to keep on your radar.

2. Why are you well-suited to the job?

You don’t want to hire someone who just wants a paycheck — you want to hire someone who is excited about the work and who will be a perfect fit for the role. And the best person to tell you whether they’d be a good fit is the employee themselves.

Asking someone why they are well-suited for the job gives you an opportunity to make sure they see the job in the same way you do and gives you the chance to see what skills they think are essential for success. It also helps you understand what their strengths are. All of these things will be important in hiring the perfect candidate.

3. What was your favorite job in your past?

Asking about a past favorite job can give you insight into the kind of working environment a candidate likes as well as the tasks they excelled at. You can make sure you’re bringing someone on board only if the specific position you are offering is one they will thrive in.

4. How would your prior coworkers describe you?

Asking about strengths and weaknesses will often get you generic answers, but asking someone how others think of them can provide more insight into their character. You’ll get a glimpse of how the candidate wants to present themselves at work and what they think makes them a good coworker. This will help you decide if the person is someone you think you’d like working closely with.

5. What are your pay expectations?

Finally, you want to make sure you are able to meet the salary expectations of the new employee — especially once you take workplace benefits and payroll taxes into account. Finding out how much they expect to get paid can help ensure you can afford to hire them.

By asking all of these questions, you can hopefully find the perfect person to come and work at your organization. If you succeed, your new employee may be an invaluable asset who plays a fundamentally important role in helping your business grow.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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State-minimum coverage is all that’s legally required to drive, but it’s not enough in every situation. Here’s what drivers need to know. 

All states require their drivers to carry some auto insurance in order to drive legally. Though each varies in what they require, state-minimum coverage rarely costs more than a few hundred dollars per year. This makes it a tempting buy for those who are short on cash.

But what often seems like a cost-saving measure at the time could lead to huge financial headaches in the event of an accident. Below we’ll take a closer look at what happens to drivers who find themselves in a wreck with state-minimum coverage.

What is state-minimum coverage?

State-minimum car insurance is the minimum amount of coverage the state requires drivers to have in order to legally operate a vehicle. The required limits and coverage types vary by state. But typically, state minimum coverage includes at least:

$25,000 of bodily injury liability coverage per person$50,000 of bodily injury liability coverage per accident$25,000 of property damage liability coverage

These are designed to protect other drivers if the policyholder causes an accident. The bodily injury liability coverage pays for any physical injuries that result from the accident while property damage liability pays for the other driver’s vehicle and any possessions damaged in the wreck.

Some states also require their drivers to have uninsured and underinsured liability coverage, which take effect if the policyholder is hit by a driver without insurance or one without adequate coverage to pay for the damages. Personal injury protection (PIP) is also a requirement in no-fault states where drivers typically bill their own insurance for hospital bills resulting from a crash.

What happens to drivers who get in a car accident with state-minimum coverage?

What happens when a driver gets in a car accident with state-minimum coverage depends on a few factors, including who caused the accident and how severe it was. In most states, the driver who is found to be at fault is responsible for paying for the damages to both parties. So if a driver has state-minimum coverage and is hit by someone else, they shouldn’t have much to worry about unless the other driver also has state-minimum coverage or is driving illegally without insurance.

But an at-fault accident is a different story. The insurance carrier will pay up to the policy’s limits for damages to the other driver. But in a severe accident, that may not be enough. If someone suffers a serious injury costing tens or hundreds of thousands of dollars, they could wind up suing the driver in an attempt to recoup the remaining costs.

The driver would also be out of luck when it came to repairing their own vehicle. State-minimum coverage doesn’t include any protection for the driver’s own car. Those hoping to protect their vehicle as well need to invest in optional collision and comprehensive coverage. But these will cost extra.

Purchase more coverage when possible

Though the likelihood of being in a costly car accident is pretty low, it’s not a risk most want to take. It could lead to massive debt, not to mention legal headaches. So it’s best to purchase more coverage whenever possible.

This might be difficult for those on a budget, but there are a few things drivers can try to get additional protection at a price they can afford, including:

Shop around: Compare rates from several insurers before purchasing a policy. Every company weighs risk differently and offers a unique rate to each driver.Take advantage of all possible discounts: Car insurance companies apply most discounts to a policy automatically. But there are a few drivers that have to opt into, like driver monitoring programs. There’s usually an upfront discount for participating in these, plus the option to save even more based on driving behavior.Go with a higher deductible: Deductibles are the out-of-pocket costs drivers pay in the event of an accident. Choosing a higher one usually lowers the policy’s premiums.

State-minimum coverage is certainly better than skipping insurance altogether, but it’s far from ideal. Drivers who aren’t able to purchase extra coverage at the moment should strive to do so as soon as they have a little extra cash in their budgets, to ensure they’re better protected in the event of an accident.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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