Credit card debt settlement: how to do it yourself
Step 1 is to contact your bank or credit card company and let them know you're experiencing financial hardship.
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Debt settlement is an option you might consider when managing your credit card repayments becomes overwhelming. Usually, debt settlement involves a company negotiating with your credit card provider (or other creditors) and agreeing on a lump sum payment that you can make to clear the debt.
This repayment is typically less than the total amount that you owe and means you can deal with the debt in one go. However, companies that offer debt settlement options also charge you pretty hefty fees for this service.
So, if you want to tackle your debt without paying a company to help, let's take a look at some of your options.
Need help now? Call the National Debt Helpline for free support
If you're struggling with credit card debt, other debts or bills and are not sure what to do, you can get free and confidential advice from a professional financial counsellor by calling 1800 007 007 between 9.30 am and 4.30 pm, Monday to Friday.
What is a debt settlement company?
This is a company that works on your behalf to help you settle outstanding debt. When you engage the services of a debt settlement company, the company will assess your financial situation and offer you some solutions that can help you repay your debts. Some options could include:
- Negotiating new payment arrangements with your creditors
- Debt consolidation loans
- Part 9 debt agreements
- Budgeting advice and tips to help you manage your money
- Credit repair services
If you decide to use a debt settlement or debt solutions company, make sure you ask about fees first so that you can decide whether it's affordable for you.
How can I settle credit card debt on my own?
- Contact your bank or provider. Call the credit card company to let them know you are experiencing financial hardship. The sooner you take this step, the more options you could have for dealing with the debt.
- Speak to the financial hardship department. Banks and credit card providers have dedicated financial hardship teams that can help you find solutions when you're struggling. They will ask about your circumstances and carefully consider the situation before suggesting some options for dealing with the debt.
- Negotiate a payment plan. Discuss your financial obligations and what type of payment plan would be affordable for you. Some options could include reduced repayment amounts over a longer period of time, waived fees or charges, restructuring or consolidating debts or even – in extreme circumstances – freezing the account. Remember to keep your requests reasonable. It can also help to justify requests by explaining how they relate to your current circumstances.
- Draw up a budget. Work out a realistic budget to help make sure you meet the new repayment plan. This could also be an opportunity to see if there are any areas of your spending that you can cut back on – at least until the debt is settled.
- Repay your debt. Pay the amount necessary to settle your debt. If you have any more concerns during this time, contact the financial hardship team again and let them know. You could also consider calling the National Debt Helpline on 1800 007 007 to talk about what's going on.
What other options are available?
Depending on the amount of debt and your circumstances, some of the other options you could consider include:
- Balance transfer credit cards. A balance transfer credit card offers an introductory 0% p.a. interest rate for a set period of time, such as the first 12 months, when you move your existing debt to the new account. This can temporarily help you pay a larger amount of debt off your card because there are no interest charges. However, if you have a large debt (or debts), you may not be able to move it all to a new card.
- Debt consolidation loans. If you're juggling multiple debts, this type of personal loan gives you a way to move them onto a single account. This means that you will only have to make one repayment and deal with one set of fees, which can make managing the debt more straightforward.
- Free financial help. While debt settlement and debt solution companies offer help for a fee, there are a number of support services in Australia that you can access for free. This includes financial counselling services and financial assistance offered by organisations including The Salvation Army and Mission Australia.
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Ask an Expert
I am drowning in CC debt. Having companies constantly contacting me. What can I do? I have read all about ‘offering’ to repay a percentage is this possible?
Hi Jay,
Thank you for reaching out to us.
You may settle your credit card debts in different ways which will depend on your financial capability. See the options that you may take in settling your credit card balance.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions. Moreover, you may read our guide on debt solutions that you may take to free yourself on your outstanding balances.
I hope this helps.
Please do not hesitate to reach out to us again if you have additional questions.
Cheers,
Ash
Hi, We have 3 credit cards and about 18 months ago we contacted one of those dept help assist companies to deal on our behalf to claim financial hardship and so basically that was all good interest was frozen and we made minimal repayments, however not so long ago this dept help company has gone into receivership and we were stuck. I then contact the banks directly and we negotiated for another 6 months which is great. Basically in a few weeks we will have enough money pay them out however we were told that you can make them an offer to settle the debt and one of them have accepted around 20% off what is owing $13500 Now my question is what is recorded on the Credit File, will they listed at Default or as settled now sure where to call and ask.
Hello Molly!
Thanks for the inquiry! We know you’re working hard to get this all taken cared of. :)
Debt settlement companies may declare “paid”, “settled” or “paid as agreed” on your credit file, depending on their internal procedure and differentiation. We recommend that you consult with your settlement company to verify which one they put on the file of their customers who are paying less than the actual balance.
Hope this helps.
Cheers,
Jonathan
If I have a credit card debt of $35k with a bank, but also have a property valued at $500k and a loan with them of $335k, can the bank do anything with the property I have if I stop paying the credit card off?
Hi Darren,
Thanks for your question.
Please check the product disclosure statement of your credit card, under the financial hardship section. It should state what the course of action is if your financial commitments can not be met.
In most cases, your debt is transferred to a debt collector, and new payment terms can be made.
Cheers,
Shirley