One of the most stressful headaches you can experience is the dreaded default notice – which leaves many clients asking us ‘what should I do if my credit card defaults?’.
Well, a default notice isn’t the same as a default being recorded on your credit file. It’s a formal warning that gives you an opportunity to take the action set out in the notice before the lender takes certain steps to recover what you owe.
Whether you’ve received a default notice already, or your credit card has already defaulted, it doesn’t mean you’re out of options. Here’s what we would recommend.
1. Check What the Letter Says
A default notice is a formal warning explaining what you need to do, and by when, to bring your account up-to-date. You’ll normally be given at least 14 days to take the action set out in the notice.
Read it carefully and note the deadline. If you can pay the amount requested by then, you may be able to stop the account from defaulting. But if you can’t, don’t ignore the notice – instead work out what you can realistically afford.
If the account has already defaulted, paying the balance won’t remove the default from your credit file straight away. It will usually remain there for six years from the date it was registered, but paying can at least show that the debt has been settled.
2. Work Out What You Can Afford
Before agreeing to repayments, make a simple budget listing your household income, essential living costs and priority bills.
Make sure you account for essential living costs and your priority bills first, which include the following:
- Mortgage, rent or loans secured on your property
- Council tax
- Energy bills (e.g. gas and electricity)
- Food costs
- Magistrates court fines
- Maintenance payable to an ex-partner or child
- Income tax or VAT arrears
- TV licence
This will help you clarify what, if anything, is available for credit card repayments.
Don’t offer more than you can manage just to get a creditor off the phone. You can share your budget and ask whether they’ll consider an affordable payment arrangement or other support.
They may not accept your offer, so get advice if you’re unsure what to propose.
3. Contact Your Provider
Tell your credit card provider if you’re struggling and ask what options are available.
Depending on your circumstances, they may discuss an affordable repayment plan or other help with you.
Important: Always keep copies of any letters and make a note of calls and emails, including dates and what was agreed.
4. Stop Using the Card
If you’re still able to use the card, avoid adding further borrowing while you’re struggling to manage the existing balance. Also, if you have other debts, don’t let a credit card payment leave you unable to cover essential bills.
Free debt advice can help you work out which payments need attention first.
Need Credit Card Debt Help?
A default can affect your credit record – but focusing on what you can afford and getting the right support can help you move forward.
The most important thing is not to ignore letters, or agree to payments that leave your household short.
If you’re behind, or unsure if you can keep up with an arrangement, please get in touch to speak to a debt advisor or use our free* online debt advice tool – it takes less than 15 minutes to complete and shows you your options on-screen instantly.
*Our advice is free, but if you sign up for a debt solution, a fee will apply for some solutions.
