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What happens if you don’t pay credit card bills?

Was passiert wenn man eine Kreditkarte nicht bezahlt in der Schweiz?

It is an extremely unwise idea not to pay the credit card bill. If possible, at least use the installment facility and pay the minimum amount.

What happens if you don’t pay credit card bills in Switzerland?

If you don’t pay your credit card bill in Switzerland, three stages of escalation follow. First, there are reminders, then debt collection agencies and a ZEK entry, and finally, there are legal consequences, which can lead to debt enforcement by the state.

Please contact your credit card provider if you face serious payment difficulties. If you are already in debt, contact a debt counseling center today.

How does the installment option work?

Credit cards usually have an installment option. This means you only have to pay a certain proportion of the bill and can defer the rest. Card issuers may require repayment of 3% of the amount spent, for example. In this case, everything is fine, and you don’t have to expect any problems as long as you pay the specified minimum amounts.

However, it is better to pay the bill in full, despite the installment option. The reason is that interest is charged on the outstanding amount. In Switzerland, this is generally between 9% and 13% (calculated per year), which is a lot! You can find the exact interest rate of your credit card in the general terms and conditions under “Annual interest rate”.

The following sections explain what happens if you do not pay the bill. In other words, if you do not pay the minimum amount for the installment option.

Stage 1: Payment reminders and overdue notices

Payment Reminders

Reminders: If a credit card bill is not paid on time, the card company will send the cardholder an initial reminder. This reminder is often designed as a friendly reminder and indicates that payment is overdue. Typically, a new deadline is set within which the payment should be made. Additional charges are sometimes incurred at this stage, but usually not yet.

Consequences of late payments: If the cardholder ignores the first reminder and the set deadline passes without payment being received, further reminders will follow. The additional costs increase with each additional reminder. These consist of reminder fees and interest on the overdue amount.

The amount of the fees and interest varies depending on the credit card provider but can quickly lead to a considerable increase in the original debt. At this stage, the cardholder must take action to avoid serious financial charges.

Stage 2: Debt collection agency and ZEK entry

Debt Collection Agency

Involvement of debt collection agencies: If the debt remains despite multiple reminders, the credit card company can hire a debt collection agency to recover the outstanding amounts. The use of a debt collection agency leads to additional costs that are charged to the debtor. Debt collection agencies can also take more intensive measures to collect the debt, such as more frequent attempts to contact the debtor by telephone or post.

Negative entries at credit reference agencies: In addition to the direct financial consequences, persistent non-payment also leads to a negative entry at credit reference agencies. In Switzerland, this is an entry called ZEK (Central Office for Credit Information).

Such an entry can seriously impact the debtor’s creditworthiness and significantly restrict their ability to obtain loans or financing in the future. It should be noted that loans include not only personal loans but also mortgages, car leasing, and other deferred payments. A negative entry at the ZEK remains on file for a certain period (up to 5 years) and can also affect approval for new credit cards.

In these stages of escalation, it becomes clear that ignoring credit card bills can quickly become a complex and very costly matter. It is, therefore, of the utmost importance to react early and contact the credit card company at the first sign of payment difficulties to find a solution.

Legal Action

Legal action in the event of persistent non-payment: If all previous attempts to collect the outstanding amounts fail, the credit card company will take legal action. This usually involves filing a lawsuit with a civil court. The process begins with an official complaint filed against the debtor, leading to a court case.

If the judgment is made in favor of the credit card company, the debtor is legally obliged to pay the outstanding amounts plus court and legal costs.

Debt enforcement proceedings in Switzerland: In Switzerland, debt collection proceedings can be initiated if the debtor fails to meet the debt. This begins with the issuing of a payment order by the debt collection office. If the debtor ignores the payment order or raises an objection, the proceedings can escalate further, leading to measures such as wage garnishment or the realization of assets.

To put it colloquially: They forcibly take your things and sell them.

This process can have serious, long-term financial consequences and should be avoided at all costs!

What are the long-term effects?

If you don’t pay by the time the debt is collected, the total costs are many times higher than at the beginning. In addition to the outstanding amount on the card, there are also reminder fees, interest on arrears, costs of the debt collection agency, court, and legal costs (both your own and those of the card provider), and the costs of debt collection.

In addition to these direct costs, there are indirect costs, such as:

Negative Credit Score

Impairment of creditworthiness: A significant long-term effect of unpaid credit card bills is the impairment of creditworthiness. Negative entries at credit reference agencies can make it more difficult to obtain loans, mortgages, or other financial products in the future.

Even if the entry is not so serious that you can no longer get a loan, a poor rating will lead to considerably higher interest rates.

Difficulties with future financial transactions: In addition, a limited credit score can also affect approval for new credit cards or account openings.

Banks and other financial institutions often see customers with poor credit ratings as a risk and may refuse to issue new financial products or demand additional information.

What is the conclusion?

Non-payment of credit card bills in Switzerland has serious consequences, ranging from reminders and debt collection procedures to legal action and debt enforcement.

This escalation leads to considerable additional costs and can affect creditworthiness in the long term. It is essential to contact the credit card provider early in the event of financial difficulties and, if possible, use the installment facility to avoid serious consequences.

Responsible use of credit cards and awareness of the consequences of non-payment are essential to maintaining financial stability and a good credit rating.