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Can a Credit Card Company Garnish Your Wages?

Last updated 03/19/2024 by

Benjamin Locke

Edited by

Fact checked by

Credit card companies can garnish your wages unless you live in a state that does not allow it. Typically, the credit card company will sell the debt owed to a collection agency, which can then legally garnish your wages via court order. You can take various steps to avoid having a credit card company or debt collection agency garnish your wages directly for unpaid credit card debt.
Credit cards and the leverage of debt are crucial to the operation of an economy. Consumers use credit to make a variety of purchases that are both essential and nonessential to their daily existence. That credit is then transformed into debt, which requires the credit card holder to pay back the principal plus interest.
The most well-known negative consequence of taking on an excessive amount of debt and failing to make monthly payments is a bad credit score. What you may not know, however, is that it is also possible for credit card companies to garnish your wages directly if you have excessive delinquent debt.

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How credit card companies garnish wages

Credit card companies typically do not attempt to garnish wages directly. Instead, they sell the debt for a fraction of the cost to a collection agency. The collection agency then attempts to recuperate the money by all means possible.
Whether wages can be garnished depends on the state’s laws. Some states do not allow wages to be garnished to pay back credit card debt. There is also a long legal procedure for a collection agency or credit card company to legally garnish wages to cover credit card debt. And even if the collection agency follows through, there are limits to how much they are allowed to garnish and what type of income they are allowed to garnish from.
If you’re nervous about losing your hard-earned money to a debt collector, there are simple steps you can take to avoid wage garnishments.

What happens when I don’t pay my credit card bill?

Credit card companies expect borrowers to meet their minimum monthly payments. However, for a variety of reasons, consumers can sometimes accumulate unpaid debt. These are the consequences you face should you fail to pay your credit card bills on time:

Credit score

Your credit score gauges your creditworthiness, which has an important effect on your financial situation. Whether you are looking for a mortgage to buy a home or a loan to start a business, a good credit score and credit report are important. Being late on credit card payments will lower your credit score, which will have a negative impact on your financial life.

Late fees

Credit card companies will attach late fees to their products in case a cardholder fails to pay their balance on time. These late fees vary per credit card company, but in most cases, they will charge $30 to $40 for initial late payments and over $50 for further late payments.

Higher rates

If a credit card holder continues to miss their payments, the credit card company can then attach higher rates to their existing debt. This is called a penalty annual percentage rate or penalty APR. A penalty APR can approach interest rates over 30%.
Excessive late fees and a higher interest rate act as incentives to pay their debt off as soon as possible. If the consumer stays in debt, however, then that debt will eventually be sold to a debt collection agency.

Debt collection agency

Most credit card companies are not into chasing debt for the long haul, so it’s very seldom that credit card companies will garnish wages directly. Instead, they will sell credit card debt to a collection agency for a fraction of the cost. In fact, this is the primary business model of a collection agency: to buy discounted debt, then collect it from the consumer with additional fees.
To make this business model work, the collection agency must do everything in its power to collect the debt. This can include calling and mailing the debtor continuously. If these tactics don’t work, the agency then has the option to use the court system to force the collection of the debt through legal means.

Debt collection lawsuit

The final step a debt collection agency will take is to file a lawsuit against the debtor, which may lead to the garnishment of wages. It’s important to note here that this route is not available in all 50 states. If you are in North Carolina, Pennsylvania, South Carolina, or Texas, then your wages cannot be garnished due to credit card debt.
As for the rest of the U.S., this tactic is fair game. However, it’s crucial to understand that lawsuits are the absolute last resort for most debt collectors, and they usually won’t use this option unless they’re assured of their victory.

The lawsuit and wage garnishment process

If a credit card company or debt collector chooses to file a lawsuit in order to collect credit card debts through wage garnishment, the process typically works as follows:
Steps of lawsuit Process
1. A lawsuit is filedA credit card company will file an official lawsuit in small claims court.
2. A notice is servedThe notice of the lawsuit is served to the debtor. The credit card holder then has a chance to respond.
3. Both parties go to courtBoth parties now go to court and present the evidence to support their side of the dispute. For the credit card holder (defendant), this is an opportunity to prove why they shouldn’t be shouldered with this debt or why they can’t pay it back.
4. A judgment is issuedIf the court sides with the credit card issuer or debt collector, they will issue a judgment against the credit card holder. In this case, the credit card company can then apply through a separate court mechanism to garnish your wages.
5. Wage garnishment is granted or deniedIf wage garnishment is granted by the court, then the court order will be forwarded to the card holder’s employer. However, there are limits to how much of an employee’s wages can be legally garnished.

Pro Tip

If you receive a notice of a lawsuit from a debt collector, consider seeking help from an attorney or a debt relief firm. You might be able to negotiate a settlement or avoid the wage garnishment order if you can prove your case in court.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Wage garnishment limitations

If a lawsuit is successful and the plaintiff obtains a court order to garnish wages from the defendant, they can’t abscond with the defendant’s entire paycheck. Federal law limits wage garnishments to the lesser of two figures:
  1. 25% of an employee’s disposable earnings
  2. Disposable earnings greater than 30 times the federal minimum wage

What qualifies as disposable income?

Disposable income is defined as your net income after taxes, and other necessary expenses are paid. Federal and state taxes are not included in disposable income, nor are payments toward government programs like Medicare and Social Security.

Examples of wage garnishment

Let’s look at two scenarios in which debt collectors might want to garnish wages from employees to cover their credit card debts.

25% of disposable earnings

For this first example, imagine a full-time employee named Sebastian who works in the commodities trading industry and earns $1,500 a week. Sebastian pays about $200 a week in federal income taxes based on his tax bracket and deductions. He lives in Texas, so he is exempt from state income taxes. However, 7.65% of his wages are withheld for Medicare and Social Security.
$1,500 (income) – $200 (taxes) – $114.75 (SS and Medicare) = $1,185.25 (disposable earnings)
$1,185.25 * 25% = $296.31
In this scenario, if a debt collector is granted a court order to garnish Sebastian’s wages, he can have up to $296 taken out of his paycheck every week.

Income below 30 times the federal minimum wage

Now imagine a part-time employee named Tony who works 20 hours a week at a pizza shop down the street. His only income is from this part-time job, where he earns $145 a week. He doesn’t even earn enough to pay federal income tax, and he doesn’t contribute to Social Security or Medicare.
In Tony’s case, it’s actually not possible to legally garnish his wages. Assuming a federal minimum wage of $7.25 in 2022, the minimum he would need to make in disposable earnings a week to have his wages garnished would be $217.50.
30 * $7.25 (federal minimum wage) = $217.50 (minimum disposable earnings)
Since Tony’s $145 falls well below that limit, he is exempt from having his wages legally garnished from his paycheck to cover his credit card debts.

Wages that can and can’t be garnished

When it comes to wage garnishment, not all income is considered equal. Some types of income are exempt from garnishment. The table below presents examples of wages that cannot be legally garnished:
Wages exempt from garnishment
Supplemental Security Income (SSI) benefits
Veteran’s benefits
Civil service benefits
Service member pay
Military annuities or survivor benefits
Federal student aid
Railroad retirement benefits
Financial assistance from the Federal Emergency Management Agency (FEMA)
Social Security
Almost all income earned in the private sector is considered fair game for wage garnishment. This includes typical wage structures paid to employees, such as salaries, commissions, and bonuses. Wage garnishment can also extend to insurance settlements and severance or termination pay.
On the flip side, government benefits cannot be legally garnished. Income from student aid, veterans aid, and civil service benefits are all exempt from garnishment.
The IRS and other government agencies do have additional powers when it comes to garnishing benefits. For example, under the Automated Federal Payment Levy Program, the IRS can garnish up to 15% of Social Security benefits, and they don’t even need a court order. VA benefits can also be garnished, but only for spousal or child support and under certain conditions.

How to avoid having your wages garnished

Let’s be honest: no one wants to have their wages garnished. If you are consistently behind on paying your credit card debt, here are some strategies you can use to avoid a lawsuit that will lead to wage garnishment.

Debt restructuring or a debt management plan

If you have an excessive amount of debt, there are ways to restructure it in order to ease the payment burden. One option is to consolidate the debt with only one creditor rather than keeping it spread out among multiple creditors. In many cases, you can even lessen the payment amount and frequency by restructuring your debt.
Another option is a debt management plan (DMP). With a DMP, you make payments to a credit counselor, and they in turn pay your creditors.

Debt settlement

With a debt settlement, you can approach your creditors directly and offer to pay less than the full amount of debt you owe. However, this process is complicated and not always fruitful. The settlement will have to make sense for you and the credit card company (or debt collector), so don’t expect to have 75% of your debt wiped clean.

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Filing bankruptcy may be a useful option if you have any other debt alongside your credit card debt. After all, for many debtors, credit card debt is only one small slice of the overall debt they owe to creditors. Chapter 13 and Chapter 7 bankruptcies are two ways to either wipe your credit card debt clean or restructure your debt through the court system.


How can I get credit card companies to stop garnishing my wages?

To stop credit card companies from garnishing your wages for outstanding credit card debt, you can file bankruptcy, restructure your debt, or enter into a debt settlement.

What is the most a creditor can garnish?

Under federal law, a creditor can garnish 25% of your disposable earnings greater than 30 times the federal minimum wage (which is $7.25 as of 2022).

What three things must a company do before they can garnish my wages?

Before a credit card company can garnish your wages, they must file a debt collection lawsuit against you, serve you the notice, and win a wage garnishment order in court.

Can credit card companies garnish my bank account?

Yes, in certain situations, a credit card company could garnish your bank account by freezing it.

Key Takeaways

  • If you fail to pay your credit card debt and it becomes delinquent, a credit card company can potentially garnish your wages.
  • However, credit card companies must take certain legal steps to garnish your wages, and some states do not allow wage garnishments for credit card debt.
  • Even if a credit card company successfully obtains a wage garnishment order, there are limits to how much money they can take out of your paycheck.
  • Wage garnishment can be avoided using certain debt restructuring strategies, such as filing bankruptcy or entering into a debt settlement.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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