DROWNING IN CREDIT CARD DEBT
This fact sheet is for information only. It is recommended that you
get legal advice about your situation.
CASE STUDY
Kylie has five credit cards. Kylie is stressed because all of her
credit cards are maxed out. She is over the limit on two of the
cards and is getting called almost everyday by two different
banks demanding repayments. Kylie tries to make repayments
but with all the late fees being charged she is getting nowhere.
FACT SHEET
ARE YOU OVERCOMMITTED?
It is very easy to get overcommitted with credit card debt. This fact
sheet will give you some ways to tackle your credit card debt. This
fact sheet is only for people who are struggling with debt. This fact
sheet is NOT for you if:
CALL THE
CREDIT & DEBT
HOTLINE ON
●●
You are in financial hardship due to a significant reduction
in income (for example, unemployment, illness etc.) See
Fact sheet: Financial Hardship
●●
You were given a credit card limit you could not reasonably
afford at the time the credit card and/or limit increase was
granted. If you think this might apply to you – get Legal
Advice as the loan may be arguably unjust or unsuitable.
1800 007 007
TACKLING CREDIT CARD DEBT
THE AIM IS TO REDUCE YOUR CREDIT CARD DEBT TO AN
AMOUNT YOU CAN COMFORTABLY MANAGE.
STEP 1
Financial Rights Legal Centre Inc.
ABN 40 506 635 273
Fact sheets are information
only and should not be relied
upon as legal advice. This
information only applies to
NSW.
©2014 Financial Rights
All rights reserved.
You need to be committed to trying to reducing your credit card
debt. This may mean reviewing your budget and cutting down on
unnecessary expenses and stop using your credit cards (including
direct debts to your credit cards if possible).
It also means cancelling all of your credit cards except for one. That
credit card should have a limit you can manage. It should also be the
credit card you want to keep. As you repay this credit card reduce
the credit limit until you reach the credit limit that you can manage.
STEP 2
If at all possible make the minimum repayments on all of your credit
cards.
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FINANCIAL RIGHTS LEGAL CENTRE | FACT SHEET | CREDIT
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REMEMBER:Credit card debt is unsecured debt so it is not as high a
priority debt as a home loan or car loan. Get urgent advice if you are
having trouble paying a home loan or car loan.
STEP 3
If you cannot make the minimum repayment on all of your credit cards
then you should make the minimum repayments on as many credit cards
as possible. This means that you can concentrate on making a repayment
arrangement on one or two credit cards instead of every credit card.
FACT SHEET
The main difficulty with juggling credit card debt is trying to deal with so
many people demanding money. This is why the best strategy is to pay
the minimum repayments on as many credit cards as possible so those
credit cards are in order. Then you should concentrate on negotiating a
repayment arrangement on the other credit cards.
When you ask for a repayment arrangement:
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Say you are in financial hardship;
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Ask for no interest or fees to be charged for three months while
you try and catch up;
●●
Offer the amount that you can afford to pay.
Many lenders have an obligation to try to work with you while you are
in financial hardship. Even though the lender does not have to make an
arrangement there is a good chance they will agree to at least an interim
arrangement.
You should use the three months to get the credit card back in order. If
the lender won’t agree to an arrangement you need to keep persevering
and asking but continue to make the repayment that you can afford.
Some lenders will offer you a complete “moratorium” on your card for
three months. It is best that you keep paying whatever you can afford,
otherwise you will find yourself in the exactly the same position in three
months time and the lender won’t necessarily be so helpful the next time
you ask.
STEP 4
By this step you should now be making at least the minimum repayments
on all of your credit cards. If so, well done! If not, you need to get some
more help:
●●
See Fact Sheet: Financial Hardship; and
●●
Obtain a referral to see a free financial counsellor by ringing
1800 007 007.
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FINANCIAL RIGHTS LEGAL CENTRE | FACT SHEET | CREDIT
FINANCIAL
HARDSHIP
CARD
DEBT
REMEMBER:Unsecured debt like credit cards may not be your highest
priority debt, but it can cause you serious problems in the long run if the
lender takes you to court. Don’t ignore the problem. If you can’t reach
agreement with the lender – get some help.
STEP 5
You have two main options now on how to proceed to reduce your credit
card debt:
FACT SHEET
●●
Option 1 – Begin making extra payments to the credit card with
the smallest balance.
●●
Option 2 – Begin making extra payments to the credit card with
the highest interest.
Option 1 is recommended because it will be the easiest balance to pay off.
Paying off a card debt completely gives you a great sense of satisfaction
and the motivation to continue. If your lowest balance is the highest
interest credit card – even better!
Once you pay off one credit card those repayments you were making to
the credit card that has been paid off can now be used to pay the credit
card with the next lowest balance. You continue with this process until all
the debt is repaid.
REMEMBER:This process is slow to start but then moves very fast once
you pay off the first credit card. STAY WITH IT!
NEED SOME MORE HELP?
See Fact Sheet: Getting Help for a list of additional resources.
Last Updated: February 2014
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FINANCIAL RIGHTS LEGAL CENTRE | FACT SHEET | CREDIT
FINANCIAL
HARDSHIP
CARD
DEBT