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Credit Card Debt: What to do if you Can’t Pay

Struggling to repay credit card debt? Here’s some tips on what to do if you can’t repay your credit cards.
A confused man holding two credit cards.

A credit card can be a great tool: it can help you pay for things you’d not normally be able to afford, and it can even improve your credit score.

If you have a good credit rating, you might even have had credit card companies contacting you to offer you credit cards – sometimes with tempting introductory interest rates.

But credit card repayments can add up.

We understand that emergency costs or even extra costs such as birthdays or Christmas, can mean some months you have less money than others. This could result in defaulting on monthly payments or paying under the minimum payment. If this happens once or twice it can be no big deal, but it can become a credit card debt problem if you can’t make up the payment next month.

What happens if you can't make the minimum credit card payments?

Credit card companies often offer promotional 0% or low interest rates to clients on the condition that they meet the minimum payment per month – usually around £25.

If you don’t meet the minimum payments, then you’ll lose the promotional interest free period and have to pay the regular rate. On top of this, you might be charged an additional late fee.

These charges and extra interest rates can accumulate if you’re missing several monthly payments.

You may also face issues if you’re maxing out your credit limit.

What is a credit limit?

Credit card limits are set by your credit card provider, which means you can’t spend more than that amount.

For example, if your credit limit is £1000, that means you can’t spend more than that, otherwise you could be charged a penalty fee.

What to do if you can't pay credit card bills

Once you’ve found yourself in a situation where you can’t afford the minimum payments on your credit card, it’s time to think about a new solution.

There are a few options you can consider:

Balance transfer card

Balance transfer cards are a type of credit card that allow you to pay off current outstanding debt. essentially moving your debts from one provider to another. This can be beneficial because they’ll often offer a promotional interest free period. However, they’ll charge a balance transfer fee, usually no more than 4%, to move your debts from one credit card company to the other. Ultimately though, balance transfers could still save you money if you’re being charged a high interest rate with your current credit card provider.

Bear in mind, if you have bad credit, you might be turned away for a balance transfer card.

Debt consolidation loan

A debt consolidation loan is a type of debt solution that enables you to pay off your existing debts, with one monthly payment to your debt solution provider. This option is particularly useful if you have more than one debt.

With a debt consolidation loan, you can include many different unsecured personal loans from credit cards to store cards, payday loans, and much more.

There is also the option of creating your own repayment plan and proposing it to your credit card company, which we will cover later.

Our customer Fiona negotiating a settlement for her credit card.

Talking to your credit card company

Credit card providers are going to be much more amenable if you speak to them about your financial problems rather than if you just miss your monthly payments. Your credit card company will be aware that sometimes their clients might struggle with their monthly repayments and need some help or leniency. You could ask your credit card provider for a payment holiday.

What is a payment holiday?

A payment holiday is a short-term agreement that allows you a bit of extra time to get your finances in order and to work out what to do next. You would still incur arrears and interest rates will be added though.

It is also possible your credit card company won’t agree to a payment holiday if they don’t think it’s within their best interest.

Creating your own repayment plan

If you know you can afford to repay your credit card debt on your own terms, you can start by making a payment plan.

It begins with a budget:

Write out a budget with how much you can realistically afford to pay each month. Make sure you deduct your priority debts first, utility bills, rent or mortgage, or any other essentials. If you’re not honest when making your budget, the exercise will be moot as you’ll end up struggling to make payments again in the future.

Once you know what an affordable minimum payment for you per month is, you can bring this to your creditors and propose to change your minimum monthly repayments. If you can prove you’ll be able to meet that payment, they may agree to it. It may take you longer to repay your credit card company, but it could help you in the short term to have a little extra cash leftover.

A credit score and a big question mark.

How does unpaid credit card debt impact your credit rating?

Late or missed payments will show up on your credit file, and therefore impact your credit rating.

Other lenders will want to know if you have an outstanding balance on a credit card before lending you more money. So, unpaid credit card debts could affect your chance of getting credit in the future.

What happens if you never pay your credit card debt in the UK?

You could go to court if you never pay back your credit card debt, but it probably would never get that far.

Credit cards are covered by the Consumer Credit Act, which protects the rights of consumers and holds credit card companies up to a certain standard. It ensures businesses that lend money do so in a legitimate and honest manner, including how they advertise their products or services.

This is why you should always receive clear, open, and transparent information on your credit, and should be well informed if you make any defaults or miss payments.

If you miss the minimum payment, then your lender will contact you immediately and make any extra charges which you should be well aware of in advance. If you continue to miss payments, then they may take further action. Your credit card company is within its rights to employ a debt collection agency.

Debt collection agents are allowed to come to your home to demand payment, but they can’t repossess your belongings like a Bailiff can. Make sure you check your rights, and their ID, before allowing anyone into your home. If you’re unsure, don’t let them in.

If things escalate, you may be issued with a County Court Judgement (CCJ) and they may send a Bailiff if this is ignored or you fail to make the payments.

Can credit card debt be written off?

In theory, credit card debts can be written off but you would need to enter into a formal debt solution.

In England this could be:

  • An IVA or Individual Voluntary Agreement
  • DRO or Debt Relief Order
  • Bankruptcy

These options don’t always allow you to write off your credit card debt and you’ll only write off what you actually can’t afford to pay. Creditors will only agree to these solutions if they believe it will benefit them more than if you don’t take a formal solution.

Always seek debt advice before signing up for any kind of debt solution, formal or informal.

An image of a hand pressing an apply button on a mobile phone screen.

Other solutions to credit card debt

A debt consolidation loan is an alternative debt solution. It allows you to borrow enough money to pay off your existing debts. So that you just pay one, affordable monthly payment at a fixed interest rate.

Debt problems can become overwhelming and if you owe a lot, it can be difficult to start paying it back. But ignoring your money worries will only make it worse.

If you’re looking for a debt consolidation loan, fill in an online application form for more information on your options.

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Unsecured Loan Representative 69.9% APR

Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.

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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.

Further reading

What are the Different Kinds of Unsecured Loans?

Understand what an unsecured loan is, and how best to use the different kinds of unsecured loans in 2023.

What are the Different Types of Secured Loans?

With so many different types of loans available, it can be difficult to know which is right for you. For more information on secured loans, read this expert article.

Persistent Debt – What Does it Mean for Your Credit?

Persistent debt can affect your credit rating for a significant time period. Read to find out more.