Credit card debt settlement
Struggling with credit card debt? You have a few ways to sort it yourself, or you can pay a debt settlement company to do it for you.
Key takeaways
- If you're in serious credit card debt, you could pay a debt settlement company to negotiate payment terms with your credit card provider.
- But there are a few ways you can do it yourself. This includes a balance transfer credit card, a hardship assistance arrangement with your creditors. And of course, budgeting and repaying the debt.
- You can also call the National Debt Helpline on 1800 007 007 and get free and confidential help from a professional financial counsellor.
What is a debt settlement company?
A debt settlement company works on your behalf to help you settle outstanding debt by looking at your financial situation and offering different solutions. Some options include:
- Negotiating new payment arrangements with your creditors
- Debt consolidation loans
- Part 9 debt agreements
- Budgeting advice and tips to help you manage your money
- Credit repair services
Should I use a debt settlement company?
There's nothing wrong with using a debt settlement company. But you need to know how much they charge and how their service could impact your credit score.
And you also need to know that it's possible to negotiate a debt settlement with your creditors yourself. This could save you money.
4 steps to settle credit card debt on your own
- Contact your credit card provider's financial hardship department. Banks and credit card providers have dedicated financial hardship teams that can help you find ways to settle your credit card debt. Just call your provider and let them know you are experiencing financial hardship. They will ask about your circumstances and suggest some options for dealing with the debt.
- Negotiate a payment plan. Let your credit card provider know what your financial obligations are and what type of payment plan would be affordable for you. Some options could include reduced repayment amounts over a longer period of time, waived fees or charges, restructuring or consolidating debts or even freezing the account.
- Draw up a budget. Create a budget to help make sure you meet the new repayment plan. This could also be an opportunity to see if there are any areas of your spending that you can cut back on – at least until the debt is settled.
- Repay your debt. Pay the amount necessary to settle your debt. If you have any more concerns during this time, contact the financial hardship team again and let them know. Remember you can get free support at any stage by calling the National Debt Helpline on 1800 007 007.
"How I paid off $185,000 of credit card debt in 5 years"
Other ways to deal with credit card debt
Depending on the amount of debt and your circumstances, some of the other options you could consider include:
Balance transfer credit cards
A balance transfer credit card offers an introductory 0% p.a. interest rate for a set period of time, such as the first 12 months, when you move your existing debt to the new account. This can temporarily help you pay a larger amount of debt off your card because there are no interest charges. However, if you have a large debt (or debts), you may not be able to move it all to a new card.
Debt consolidation loans
If you're juggling multiple debts, this type of personal loan gives you a way to move them onto a single account. This means that you will only have to make one repayment and deal with one set of fees, which can make managing the debt more straightforward.
Free financial help
There are support services in Australia that you can access for free, including the National Debt Helpline's financial counselling service (1800 007 007) and financial support teams at The Salvation Army and Mission Australia.
Finder survey: How stressed are Australians from different states about their credit card debt?
Response | WA | VIC | SA | QLD | NSW |
|---|---|---|---|---|---|
| I don't have credit card debt | 35.59% | 27.99% | 34.67% | 35.06% | 27.92% |
| Not at all stressed | 33.9% | 40.27% | 48% | 42.86% | 42.45% |
| Somewhat stressed | 25.42% | 26.96% | 13.33% | 16.88% | 22.22% |
| Extremely stressed | 5.08% | 4.78% | 4% | 5.19% | 7.41% |
Source: Finder survey by Pure Profile of 1113 Australians, December 2023
Data for ACT, NT, TAS not shown due to insufficient sample size. Some other states may also be excluded for this reason.
Data for ACT, NT, TAS not shown due to insufficient sample size. Some other states may also be excluded for this reason.
Frequently asked questions
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I am drowning in CC debt. Having companies constantly contacting me. What can I do? I have read all about ‘offering’ to repay a percentage is this possible?
Hi Jay,
Thank you for reaching out to us.
You may settle your credit card debts in different ways which will depend on your financial capability. See the options that you may take in settling your credit card balance.
You may arrange a negotiation with your credit card company wherein you do not necessarily need to pay all your balance owing but both parties will reach a mutual agreement. You may refer to our guide above on how you can negotiate a suitable payment agreement.
Applying for a 0% balance transfer credit card so you can focus on paying your debt other than having the interest adds up. Please use our comparison table to help you find the card that suits you. Keep in mind that you may check first the eligibility requirements of the banks before acquiring it.
You may consolidate your debt with a personal loan. You may apply for a loan with as low as 7.5% interest rate.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
I hope this helps.
Please do not hesitate to reach out to us again if you have additional questions.
Cheers,
Ash
Hi, We have 3 credit cards and about 18 months ago we contacted one of those dept help assist companies to deal on our behalf to claim financial hardship and so basically that was all good interest was frozen and we made minimal repayments, however not so long ago this dept help company has gone into receivership and we were stuck. I then contact the banks directly and we negotiated for another 6 months which is great. Basically in a few weeks we will have enough money pay them out however we were told that you can make them an offer to settle the debt and one of them have accepted around 20% off what is owing $13500 Now my question is what is recorded on the Credit File, will they listed at Default or as settled now sure where to call and ask.
Hello Molly!
Thanks for the inquiry! We know you’re working hard to get this all taken cared of. :)
Debt settlement companies may declare “paid”, “settled” or “paid as agreed” on your credit file, depending on their internal procedure and differentiation. We recommend that you consult with your settlement company to verify which one they put on the file of their customers who are paying less than the actual balance.
Hope this helps.
Cheers,
Jonathan
If I have a credit card debt of $35k with a bank, but also have a property valued at $500k and a loan with them of $335k, can the bank do anything with the property I have if I stop paying the credit card off?
Hi Darren,
Thanks for your question.
Please check the product disclosure statement of your credit card, under the financial hardship section. It should state what the course of action is if your financial commitments can not be met.
In most cases, your debt is transferred to a debt collector, and new payment terms can be made.
Cheers,
Shirley