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Ask Finder: What happens if I can’t pay my credit card bill?

Could you end up in court for an unpaid credit card debt?

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Dear Finder,
What happens if I can't pay my credit card bill? Can I be sued?
Thanks,
Pinched and penniless

While you could eventually receive a court order for an unpaid credit card account, you have a number of opportunities to deal with the debt before this legal action is considered.

In most cases, you would have at least 90 days to deal with the outstanding debt before further action is taken.

This is because you have to be issued with a default notice and given at least 30 days to settle the default before your provider (or a debt collector) can take court action for a personal debt. And a default notice is only issued when the outstanding payment is late by 60 days or more.

What this means is that being sued for credit card debt is a very extreme outcome.

So, what else could happen? Here are some of the steps credit card providers take once a payment is late.

  • Late notice/s. Your credit card provider could send you a late or overdue payment notice via email, text, post or online/mobile banking. These notices may continue – and become more frequent – as more time passes without you paying the debt.
  • Late payment fee. If your credit card charges a fee for late payments, this will apply any time after the due date on your statement if you haven't paid at least the minimum amount listed.
  • Interest charges. Credit card interest is calculated on the entire balance, which means your interest will build up over time if you don't make a payment (or even if you pay the minimum amount on your statement).
  • Other account changes. You also won't be eligible for interest-free days on purchases and may find that rewards and other perks are frozen while the account is overdue.
  • Phone call/s. While each bank and provider is different with late notices and calls, once your payment is late, your provider may contact you to discuss the situation. This gives you an opportunity to discuss what options you have for dealing with the overdue account.
  • Default notice. As mentioned above, your credit card provider has the option of issuing a default notice if you haven't made any payments within 60 days from when it was due.
  • Referral to a debt collector. Once the account is listed as default, your provider has the option of passing the debt on to a debt collection agency. It then becomes their responsibility to collect the amount that's owed. While debt collection agencies usually start with letters, phone calls or even face-to-face visits, eventually, they could take the issue to court.

In general, credit card providers will be persistent in trying to contact you about an unpaid account. If you're struggling financially or dealing with other issues, you may be able to arrange an alternative – such as a payment plan or hardship variation – so it's worth talking to your provider about your circumstances and what options are available.

What happens if I do receive a court summons for my credit card debt?

If you're issued with a court order, it will be a civil court case, rather than a criminal case. This means you won't go to jail for unpaid credit card debt in Australia.

With this type of court order, the judge will consider the circumstances before deciding on the next steps. So you will have an opportunity to put forward a defence.

At this point, it's worth noting that you may not have to pay the debt if your only source of income is from Centrelink or Workcover.

But if the judge rules that you do have to pay it, you may still be given a few options for repayments, such as a reduced amount you need to pay in full or an instalment plan.

The bottom line here is that if you're struggling with your credit card debt, contact your provider as soon as possible to talk about your options so that you can avoid some of the more serious actions they or a debt collector may take. You can also get financial help from a support service in your state or territory, or call the National Association of Community Legal Centres on 02 9264 9595.

Ask Finder is a regular column where Finder's expert writers answer your questions. All rates and fees are correct at the time of publication and we only give general advice.

Do you have a question? Reach out in the comments or speak to someone from our 24/7 customer service team.

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