Opting in for a credit card can be a hit and miss experience. It can also become a slippery slope if you haven’t chosen a lender and card that adequately suits your financial situation, or if your financial situation changes quickly for the worst. If you find yourself unable to pay (at least) the minimum required payments at their due date, there are things you need to be aware of; not only to prepare yourself for possible outcomes, but to also work to prevent them from happening.
While these tips relate to credit card repayments, all advice can be applied to all bills that you are having trouble paying.
I can’t pay my credit card for the first time, what do I do?
Not being able to make a payment once or twice, while not ideal, is nothing to get too anxious about just yet. However, you might find yourself immediately hit with a financial penalty that can gain interest as the minimum amount (plus fees) remains unpaid. These fees are added to your credit amount and will continue to accumulate the longer it is left.
If you are newly unable to pay your credit card, the very best course of action is to immediately contact your lender. They will help organise a payment plan based on when you’re better able to pay, or one that allows for lesser payments over a restricted period. If you are unsure about when your financial situation will improve, you can enquire about their financial hardship terms. This will ensure you aren’t penalised in more serious ways going forward. Communication is key. It is recommended to stay out of greater trouble to communicate with the lender every time you have a change in circumstance which affects your ability to make payments.
If your issues with payment are COVID-related, lenders are offering various options to credit card holders, but there is no blanket, nor assumed, option. You will still need to call your issuer (or, rather, opt for a live chat, as lines are busy in the current climate), and ask about waived late fees, waived annual fees and any other options they have to ease the payment burden.
I have not paid my credit card in several months…
If you have not arranged a suitable payment plan, or put a hold on your card, with your lender, you could find yourself not just in more financial difficulty, but also in some legal hot water. After around three non-payments, without communication, lenders will increase their veracity. You can expect an increase to your interest rate, having your card frozen, increased fees and then your debt being sold to a collection agency who can then move forward with legal action. Once your debt hits a credit collector, you are at much higher risk of damaging your credit rating to the point of being black listed for up to seven years.
Once again, communication is key. This time, it will be with the collection agency rather than the creditor, but the outcomes are similar. What you want is a workable payment plan to help save major credit rating damage and avoid legal proceedings against you.
I am unable to pay my credit card debts and facing legal action
While this can be an incredibly stressful experience, your best course of action is to face it all front on and take a realistic view of your financial situation. If you are facing legal action by a collection agency, your first step is to get professional advice. At Shaw Gidley, we have an array of highly skilled professionals in this area who will be able to walk you through your options, step by step. You may face having your assets and finances combed through to see where you may be able to pay your debts, or start taking steps to declaring bankruptcy if you are unable to pay.
If your credit card (or any) debt is making you feel buried under, call us today about ways to work your way through a more sustainable and positive outcome.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.