I can’t pay my credit card bill: What can I do?

If you’re experiencing financial hardship and can’t pay your credit card bill, there are steps you can take to help get your debt under control. Canstar spoke with Sarah Brown-Shaw, a financial counsellor from the National Debt Helpline, about what you can do.

1. Contact your credit card provider

“The first thing is to not hesitate and to contact your bank straight away if you think you are going to have difficulties making payments,” Ms Brown-Shaw said.

Ms Brown-Shaw recommended you call the hardship team of your bank to discuss a repayment arrangement.. Your bank is required to consider your request under the Consumer Credit Protection codes, and will usually be able to modify your repayment obligations.

Ms Brown-Shaw said it’s a good idea to be prepared before you contact your bank, with a clear picture of your income, your essential expenses and how much you have to put towards payments on credit cards and other debts like loans and mortgages. You may even be able to have a financial counsellor join you on your call or negotiate on your behalf.

Ms Brown-Shaw said there are “no hard and fast rules” as to what hardship options are available to you, and arrangements can be made on a case-by-case basis.

“Look at what is manageable. If nothing is manageable then that’s the conversation that you have. There’s no point being pressured into agreeing to a payment that you know you cannot make,” she said.

2. Make a plan to reduce your debt

If you have credit card debt, it’s important to make a plan to reduce it. For example, the National Debt Helpline says you can:

• Avoid using your credit card/s for more purchases, except in the case of emergencies

• Pay the debt with the highest interest rate or the smallest debt first

• Close each credit card account when you pay it off

• Reduce your credit card limit.

You may also want to consider a credit card balance transfer. This is when you move the amount you owe on an existing credit to another credit card that has either a 0% or a low interest rate for a limited time. Be aware that credit cards with a balance transfer offer typically revert to a high interest rate at the end of the promotional period, which means you could end up back at square one if you don’t pay off your balance in that time.

Bear in mind that any new purchases or cash advances made using the new card will generally incur interest from the start. The new card provider may also charge a fee for transferring your balance, in addition to any annual card fee that applies.

If you have multiple sources of debt, another option is to take out a debt consolidation loan to pay off your existing debts. However, it’s important to weigh up the potential risks. For example, you will need to make sure that the new loan is cheaper than your current loans and that you can keep up with the repayments.

3. Get help if you need it

If you are feeling overwhelmed by credit card debt, contact a financial counsellor as soon as possible.

You can get free financial counselling through some community organisations, community legal centres and government agencies. You can also speak to a financial counsellor for free by calling the National Debt Helpline on 1800 007 007.

What happens if you don’t pay your credit card bill?

If you can’t pay your credit card bill and you don’t have any hardship arrangements in place, your lender will ordinarily charge you a late payment fee, which you may need to pay interest on.

If you don’t pay your closing balance in full, you also won’t get an interest-free period on your credit card. This means you’ll pay interest on anything you buy with the card.

Your bank can also issue you with a default notice and eventually take legal action against you. This can have a negative impact on your credit score.

If you have made a repayment arrangement with your bank, a default notice cannot be listed against you while you are keeping with the arrangement. Additionally, the Australian Banking Association has announced that if you defer your credit card payments as a result of coronavirus, this will not impact your credit score.