What Happens When You Don’t Pay Your Credit Card?


It’s important to know what the impact of not paying your credit card will have. Laurence Hugo from Credit Mediation Services points out what may seem like an innocuous, “easy”, short-term solution, can end up being a far more costly outcome in the long run and not just to your bank balance. Laurence discusses what typically happens when you don’t pay:

During the first 3-6 months of non-payment, your financial institution will likely get in touch via phone, email and mail. The communication will be quite friendly but firm and as the arrears period grows, the tone of the contact will become more assertive. Once your overdue credit card or personal loan hits the 6 months in arrears mark, a credit default can be placed on your credit report (though Equifax allows defaults from 60 days in arrears). It is also worth noting that in this period, interest on the amount owing will be accruing as normal so the debt is not stagnant, it will continue to grow in this period.

Once you hit that 6-month overdue point, your account is likely going to be reviewed for possible legal action. It more than likely though, that the credit card or personal loan debt will be sold to a debt collection agency. The debt is usually sold for approximately 30-40% of its’ face value and once sold, the bank hands the full responsibility of the debt over to that agency and no longer has anything to do with it.

The debt collection agency will begin to “chase” the debt in a far more intensive way than the lending institution they bought it from. They will start the same way, with letters and phone calls but it will be much more intensively and regularly. The debt collection agency will demand far more in monthly repayments than the banks will.

The debt collection agency will only try and chase the debt for so long. If you fail to pay the amount, or organise a payment plan for the full amount, the defaulted account will be individually assessed for a Statement of Claim (a court summons). The most common aim of these Statement of Claims, is for a filing of bankruptcy in order to seize assets or issue a garnishee order (attachment of earnings).

As you can see, not paying a credit card or personal loan can have some pretty far-reaching and damaging consequences. If credit card debt is overwhelming you and you don’t know where to turn, a phone call to Credit Mediation Services to find out what options are available to you would be a beneficial move. With years of experience in the industry and has helped so many people out of overwhelming debt situations, our team is confident we can help you turn your debt nightmares into a distant memory.

Disclosure: This article is not intended as legal advice; the content reflects the general trend of the debt industry only.


Laurence Hugo is the director of Credit Mediation Service Pty Ltd (www.creditmediation.com.au) and has worked in debt negotiations for 25 years and pioneered the Debt Negotiation Industry in Australia. Credit Mediation Service Pty Ltd have assisted thousands of families and businesses get out of debt and has overseen the forgiveness of tens of millions in debts. Laurence Hugo has also worked with the homeless through Wesley Mission and for 7 years performed suicide / mental health training for counsellors with Sydney Life Line.

If you or someone you know would like to be introduced to Laurence for a confidential and obligation free chat, please don’t hesitate to make contact with me.


Cairns Mortgage Broker – Jason Thomson is a Mortgage Adviser and Finance Broker based in Cairns with clients all around Australia. Client reviews featured on his website prove that Jason is a trusted industry professional, facilitating great outcomes for his clients. Using his wealth of experience in financial services, he thrives on delivering superior service. Jason is very approachable and is always looking for new clients to help in the often confusing world of finance and property. Offering a no fee service, you’ve got nothing to lose by having an obligation free chat with Jason today.