Credit Cards

Personal credit cards are widely available and are a convenient way to pay your bills. They’re risky though because you’re spending money you might not actually have.

If you’re struggling to make repayments on your credit card, follow these steps.

Steps to take if you’re struggling with credit card debt

01

Work out what you can afford to pay

If you’re struggling to pay back money you owe, the first thing to do is to work out what you can actually afford to pay by doing a simple budget. How to work out what you can afford to pay.

If you can afford to pay something
Start paying the amount you can afford and get in touch with your creditor straight away to put a repayment agreement in place.

If you can’t afford to pay anything
Call us on 1800 007 007 straight away for advice.

02

Contact your credit card lender

Get in touch with your lender’s hardship department. Tell them you’re in financial hardship and why you’re struggling to make repayments.

In most cases the lender will help you with a repayment arrangement based on what you can afford. They may be able to:

  • Stop charging you interest
  • Change the payment to an amount you can afford
  • Make longer term repayment arrangements
  • Give you a few months of making no payments so you can get back on your feet
  • Waive your debt if you are experiencing extreme hardship or have an exceptional circumstance

 

Be prepared before you make contact. Read about how to negotiate payment terms.

If you get a reduced repayment arrangement, it means:

  • Your payments will be lower, but it will take longer to repay the debt.
  • The overall cost of a loan may therefore be greater.
  • You’ll still have to pay off your debt even if your lender cancels your credit card

Remember, if you’re successful in coming to an arrangement, you need to keep to that arrangement. If you can’t afford the repayments ring your lender and change the arrangement. Your lender may cancel your credit card at any time and is likely to do so if you’re behind in repayments.

PAYING THE MINIMUM AMOUNT

If you only pay the minimum, your debt will keep growing!

For example, if you owe $5,000 on your credit card at an interest rate of 18% and you only make the minimum payments, it will take you 33 years to clear the debt with total repayments of $17,181. But if you paid $246 per month, you would clear the debt in two years and pay $5,902 in interest.

Useful tools to help you work out what you can afford are MoneySmart’s Budget Planner and Credit Card Calculator.

03

Plan to reduce your overall credit card debt

If you are spending more than you earn and using your credit card for purchases, the high interest rates and other charges means the debt can build up quickly. The MoneySmart website has an easy-to-use budgeting tool to help you keep track of your spending. Other simple things you can do are:

  • Avoid using your credit card/s for any more purchases, except emergencies
  • Keep up your credit card minimum repayments and pay on time
  • Decide to start paying extra (more than the minimum repayment) on one of your credit cards to pay it off. Start with the smallest debt credit card or the highest interest credit card.
  • Close each credit card account as you pay it off
  • Lower your credit card limit

RESOURCE

Money Smart offers more tips on how to pay off multiple credit cards.

04

If you can’t agree, you can dispute it

If you can’t come to an agreement that you think is fair and affordable, you can have the lender’s decision reviewed in the Australian Financial Complaints Authority. This free and independent service gives you an opportunity to explain how, by working with your lender, you can get back on track with your credit card payments. Refer to Dispute Resolution (Step 2).

  • The overall cost of a loan may therefore be greater.
  • You’ll still have to pay off your debt even if your lender cancels your credit card

Remember, if you’re successful in coming to an arrangement, you need to keep to that arrangement. If you can’t afford the repayments ring your lender and change the arrangement. Your lender may cancel your credit card at any time and is likely to do so if you’re behind in repayments.

05

Speak to one of our financial counsellors

If your problem still hasn’t been solved, or you’re feeling overwhelmed, call us on 1800 007 007 to speak with one of our financial counsellors.

KNOW YOUR RIGHTS

CREDIT CARD DEBT

If you were given a credit card limit you could not reasonably afford at the time the credit card and/or limit increase was granted, the loan may be arguably unjust or unsuitable.

Credit card debt is covered by the National Consumer Credit Protection Act.

This means:

  • You cannot be sent an offer to increase your credit limit unless you opted in to receiving these offers
  • For new credit cards (from 1 January 2019), the lender must assess your ability to pay the credit card within 3 years.
  • If you were given a credit card limit you could not reasonably afford at the time the credit card and/or limit increase was granted, the loan may be arguably unjust or unsuitable
  • Credit providers are legally required to complete a number of steps if they’re trying to commence legal proceedings
  • Credit providers must act reasonably in dealing with your issues. If you are not satisfied, you have a right to dispute resolution
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