A credit card is a financial tool that allows its holder, known as the cardholder, to borrow funds from a financial institution, to make
purchases or pay for goods and services.
It works on the principle of a revolving credit line, meaning the cardholder can continuously borrow up to a certain pre-approved limit as long as they continue to pay the minimum monthly repayment.
It is important to understand the fees and charges associated with credit cards before applying and activating a new credit card account:
It is also important to understand the terms and conditions of your account and to take time to consider these:
Other considerations of holding a credit card account include:
Negotiate an arrangement to pay by instalments or to settle the debt.
Refinance the loan
Even if you are just one day late in making a repayment on your credit card debt, you are in default. Your lender may send you a default notice.
If you do nothing, your debt will continue to increase as it accrues interest. It is therefore important to address the problem as soon as possible.
Ameenah skipped a repayment on her credit card last month. Her bank sent her a default notice. Ameenah calls Consumer Credit Legal Service (CCLS), because she does not know what the default notice means or what to do.
We advised Ameenah that a default notice allows her bank to recover the debt from her if she does not fix the default. If she cannot pay when she receives the default notice, she may apply to her bank for a hardship variation. To find out more information about hardship variation, see our advice on hardship.
A client entered into a simple credit card contract with a lender. The credit limit was insured. Two years later, the client obtained a second credit card with the same lender. Contrary to the client’s belief, the insurance covering the first credit card did not extend to the second card.
The client suffered serious medical problems later that year, and spent a significant amount of time in rehabilitation. During rehabilitation, the client made no repayments on the second credit card debt. Due to long-term unemployment, the loan remained unpaid for a number of years.
Many years later, the client discovered the debt had escalated and had been assigned to a debt collector. The debt collector demanded immediate payment of the debt and suggested the client obtain another loan to pay off the debt.
The client tried to negotiate with the debt collector but as the debt had been listed on their credit file, the client was unable to come to an agreement with the debt collector. The client then contacted our service for advise and we negotiated with the debt collector on behalf of the client.
The debt collector acknowledged that the client was experiencing long-term financial hardship and did not have the capacity to repay the debt. The debt collector waived the debt and confirmed that they would stop all future action to collect the debt.
This case study is an example of the best result that we could achieve for a client. Debt collectors and creditors do not typically waive loans and the outcome of your negotiation with a debt collector and creditor will vary depending on the circumstances.
CCLSWA provides a consumer voice in Western Australia in relation to policy issues and proposed reforms of legislation.
To read CCLSWA’s submission to a Senate Inquiry on Matters relating to Credit Card Interest Rates click here.
If you are having difficulty meeting your credit card repayments and would like advice please get in touch with CCLSWA for a free, confidential discussion using the form below; or scroll down to see other ways to reach us.