What happens if I don't pay my credit card bill on time?

What happens if I don't pay my credit card bill on time?

While it’s not an ideal situation to be in, missing a credit card bill can happen to the best of us. 

Failing to pay your credit card bill will have consequences, and they will only get more severe (and more expensive) as time goes on. 

If you’re worried you may not make your next bill payment in time, or if you’re already late, it pays to be prepared.

Before you do anything

Some situations are out of our control, and credit card companies can often understand this. Call a customer service representative from your credit card company and explain to them that you are experiencing financial hardship, and unfortunate circumstances mean you will be unable to pay your next bill on time. They should help you to arrange a new due date, a payment plan or waived late fees.

  1. Late fees

The first thing you can expect when you miss a paymennt is to be hit by a late payment fee. This is a type of fee that the lender will charge you on every statement if you fail to pay the minimum repayment amount on your credit card. 

They can reach as high as $35, although some cards do not charge late payment fees. 

It’s worth comparing $0 late fee credit cards if you are prone to late payments, or just for peace of mind. 

Use our credit card comparison tool to research low or zero late payment fee credit cards. 

  1. High interest charged

Another consequence of missing a payment is that your lender could increase your interest rate on your credit card while payment is still outstanding. This means that your balance is now costlier. 

Worst of all, if your missed payment impacts your credit score (see point three) future lenders will feel encouraged to charge you a higher interest rate, particularly if you take out a home loan or a personal loan. 

  1. Bad credit score

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One of the first questions you may be asking yourself is ‘does a late credit card payment affect my credit score?’. Unfortunately, the answer is yes. 

If you’ve missed one or more payments and customer service will no longer assist you, expect to have your late payment reported to a credit reporting body, such as Veda. 

According to Veda, there are three different ways late payments are recorded and impact your credit score. 

  • Late payments – if you make payment more than 14 days past the due date this is recorded on your credit report as a ‘late payment’. This can stay on your credit report for up to two years.

  • Default – if you miss a payment worth more than $150 and it is more than 60 days overdue, this is listed as a default. However, suitable steps should have been taken to collect part or all the outstanding debt, such as sending you written notice. A default remains on your credit report for five years.

  • Serious credit infringement – this occurs when an individual owes debt to a credit provider and has not contacted them for six months or more, despite attempts by the credit provider to contact them. The individual has left, or appears to have left their last known address without paying the debt and without providing the credit their new or forwarding address. This will remain on your credit report for seven years, unless payment is made. In that case, it will revert to a default and stay on the credit report for five years.
  1. Debt collection

After forwarding your debt to a credit reporting body such as Veda, they may forward this to a debt collector to chase. This is not ideal as not only will it negatively impact your credit score, but this will add a lot more stress to your situation. 

Australian Securities & Investments Commission (ASIC) provides valuable resources for dealing with debt collectors. For example, there are restrictions on the days, frequency, and platforms that debt collectors can contact you, such as national public holidays, or over social media. 

Remember, it is against the law for debt collectors to threaten, intimidate or harass you, or to make false/misleading statements.

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Learn more about credit cards

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

Do you need a credit card to get a loan?

You do not need a credit card to get a loan, but you usually need to have a credit history. Without a credit history, a financial institution cannot assess your ‘credit worthiness’, or your capacity to pay off the loan.

If you don’t have a credit card, your credit history can reflect any record of paying off an asset. Without any credit credit history, you’re limited in the type of loans you can apply for. But you may be able to obtain a secured loan against an asset. For more information on improving your credit score, go here

How to get rid of credit card debt

  1. Calculate your debt. Credit card calculators make it easy to determine the repayments required to chip away at your debt in the shortest timeframe possible for your budget.
  2. Repayment plans. Take some time to formulate a credit repayment plan. Consider increasing your income, scaling back your lifestyle or refinancing.
  3. Talk to your credit provider. If you’re still struggling with your debt, give your credit provider a call. You may be able to come to a new arrangement.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

How to get money from a credit card

You can get money from a credit card, but generally it will cost you.

Withdrawing money from a credit card is called a cash advance, as it operates more as a loan than a simple cash withdrawal. Because it is a loan, you may be charged interest on your cash advance as soon as you make the withdrawal. Interest rates are also usually much higher for cash advances than standard credit card purchases.

In addition to the interest rate, you may also be charged a cash advance fee. This could be a flat rate, or a percentage of your total cash advance. If you are considering a cash advance, make sure to add up how much it will cost you before committing.

How long does it take to get a credit card?

There are a few stages you need to go through to get a credit card; each one takes a different length of time.

Applying for the card online, over the phone or in person is the fastest step. This usually takes around 15 minutes, provided you have all of your documents handy.

After submitting your application, it usually takes between one to 10 business days for the lender to assess your eligibility. Some lenders offer instant approval, although you will need to send supporting documents before it is official.

Once your application has been approved, expect to wait between one to 14 days to receive your card in the mail. Keep in mind that delays can happen during busy periods, such as if the lender has launched a special deal.

How do I apply for a credit card online?

How to get cash with just a credit card number

Banks and merchants usually will not allow you to access cash without a physical card, because doing so would open up opportunities for fraudulent activities. Even most non-cash credit card transactions (such as shopping online) require you to know the expiry date and CVV on your credit card in addition to the card number.

However, some banks offer cardless cash for transaction accounts. Using a secure app installed on your mobile phone, you can log onto an ATM and withdraw the money you need. This could be a practical and secure solution if you don’t have a card and need cash.