If you miss a credit card repayment, the consequences vary from a late payment fee to a black mark on your credit history. If you're struggling financially or dealing with other issues, talk to your bank or provider about what's going on. You may be able to set up an alternative, such as a payment plan or hardship variation.
If you're worried or stressed about credit card debt right now, call the National Debt Helpline on 1800 007 007 to speak to a financial counsellor for free.
The consequences of not paying your credit card debt
What happens when you miss a payment on your credit card depends on the circumstances and your credit card provider, but these are some of the possible outcomes:
You could be charged a late payment fee
Most credit cards charge a fee if you don’t pay the minimum amount required by the due date on your statement. This charge typically ranges from $5 to $35 and is applied after the due date on the statement.
The details will be added to your credit report
Since the introduction of comprehensive credit reporting on 1 July 2019, your credit report now includes your monthly repayments for the last two years. This includes whether or not you've made payments on time. Depending on how late the payment is and when you settle it, missing your credit card due date could cause your credit score to drop and will reduce your chances of getting approved for new loans. You can view a free copy of your credit report online through Finder.
You’ll be charged interest
When you miss a payment, interest will be charged for all transactions during the statement period. You’ll also be charged interest on any late payment fees, so these costs could quickly add up.
You won’t get any interest-free days
The interest-free period available on your credit card is only available when you pay your balance in full and on time for each statement period. So if you make a late payment on your credit card, you won’t get any interest free days. This means you’ll have to pay interest for the purchases you’ve made during that statement period. You’ll also have to pay your balance in full for at least two consecutive statement periods to be eligible for interest-free days again.
It could affect your reward points
Most credit card issuers reserve the right to freeze or cancel your reward program privileges (including earning points for purchases) if you don’t make a payment by the due date on your statement. The American Express Membership Rewards program terms and conditions even state that your enrolment may be cancelled if your payment is more than 40 days overdue.
It may lead to a default notice
If you have an overdue payment of more than $150 for 60 days or more, it can be classified as being “in default”. This results in an official notification from your credit card issuer and a listing on your credit history. Default account listings are a major black mark and will remain on your credit report for up to five years. As well as the future implications of a default credit card account, you can expect to be contacted regularly by your issuer to arrange to settle the outstanding debt.
It could be passed on to debt collectors
If you don’t make a payment on your credit card account for more than 60 days, your issuer may pass the debt on to a collection agency. Debt collectors have a different approach to credit card companies and it could be much more difficult to deal with the situation if they get involved.
Keep in mind that these consequences don't happen to everyone. Even if a provider takes a few of these actions, it would usually be over a period of time.
But the longer you don’t make a payment on your credit card, the worse things could get. It’s also worth noting that every credit card company has a different approach to late payments. That's why it's important to contact your bank or provider as soon as possible.
Could I be sued for unpaid credit card debt?
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 have at least 90 days to deal with an 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 possible but it's a very extreme outcome.
What happens if I do get a court order?
First of all, it will be a civil court case and not a criminal case. So you won't go to jail for unpaid credit card debt in Australia.
With this type of court order, the judge will consider all 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.
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, or an instalment plan.
What to do if you can’t afford to pay your credit card bill on time
If you know that you won't be able to make a payment by the due date on your statement, here are 3 steps that you can take to resolve the issue.
1. Contact your credit card company
Call your credit card company using the phone number on the back of your card on in the information booklet and let them know about your circumstances so that they can work with you to resolve the situation.
2. Request a due date extension
If you know when you will have money to pay at least the minimum amount owed on your card, you could ask your credit card provider to extend the due date. If your request is approved you could avoid fees and negative details on your credit report, but it will be at your provider's discretion.
3. Suggest a hardship variation or hardship support
If you’re experiencing ongoing financial hardship or illness and don’t know when you’ll be able to make the minimum payment on your credit card, you may want to consider a hardship variation. This is a formal legal process where you ask your lender to vary the terms of the contract. Hardship support and variations could involve some of the following options:
- A freeze on your credit card account, meaning you won't be able to use it for new purchases (which would add to the debt)
- A payment pause where you won't have to make repayments for a limited time due to hardship (such as job loss)
- A payment plan
Once you have submitted a request for hardship, your credit card provider has 21 days to respond. Your provider may also suggest other options that takes the immediate pressure off of you while you deal with the situation.
If you're feeling overwhelmed by credit card debt, remember that support is available and there are different ways to deal with it. The first step is usually talking to your credit card provider, or getting support through the National Debt Helpline (1800 007 007) or another independent service that can help you get back on track.
Could you manage your finances without a credit card?
74% of Australians surveyed said they could manage their budget without a credit card, according to our consumer sentiment tracker (November data). A credit card can be useful for managing your spending and earning points if you pay it off each month but it's risky to rely on a credit card when you can't afford to pay back what you spend. Interest charges will add to what you need to pay off and some cards have interest rates around 27% for purchases.
You might also be interested in: