Credit card defaults
If you miss your credit card repayments, you could receive a default notice from the provider. And if you can’t pay back what you owe, your account could be closed and a default registered against you. We explore the process and steps you can take to get back on track.
If you miss your credit card repayments, you could receive a default notice from the provider. And if you can’t pay back what you owe, your account could be closed and a default registered against you. We explore the process and steps you can take to get back on track.
60-second summaryIf you receive a default notice letter on your credit card, here’s what you need to know:
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What is a default?
A default happens when you don’t make payments on your credit card or loan and the provider closes your account. In effect, you’ve broken your agreement with the lender. For example, a credit card default can happen if you miss several payments or stop repaying altogether.
What is a default notice?
This is a formal letter from your lender or credit provider warning that you’re behind on your payments.
It will typically be sent to you if you haven’t kept up with your payments for between three and six months. This can vary, though, depending on the credit provider.
By law, you must be given at least 14 days to respond. If you don’t get in touch within this time, then your credit account will default and you could face legal action.
A default notice is a warning that you need to take action to avoid further, more serious consequences. It doesn’t mean that you’ve already defaulted, but you do need to act – quickly – as detailed below.
What information will a default notice letter include?
A default notice will include the following:
- The type of credit agreement you have and details of how it was broken. For example, you missed the repayments
- What you need to do, how much you need to pay back and how long you have to do this
- Details of what the creditor intends to do if you can’t repay the amount stated.
What should I do if I get a default notice on my credit card?
Receiving a default notice can be stressful, but it’s important to take urgent action. You have at least 14 days to reply and whatever you do, don’t ignore it. Here are the steps to take:
- Review the notice: check the details are correct. If anything seems wrong, then contact your credit provider. Make sure you understand what’s asked of you, including the amount you owe and the payment deadline
- Pay the required amount: if you can afford to pay what you owe, then your credit card account won’t default. There’ll be no other consequences.
If you can’t afford to pay the full amount but can pay some of what you owe, then:
- Contact your credit provider: they may offer a repayment plan to help you pay back the debt. This would avoid any further action being taken against you.
If you can’t pay any of the debt or disregard the notice, your credit card account will default. That means the creditor will cancel your credit card agreement and they could:
- Pass the debt to a debt collection agency
- Take court action against you
- Ask a court to take back the vehicle or other goods if your debt was a hire purchase agreement
- Ask for help and advice: nobody should feel that they must tackle debt alone. You can find free, expert debt advice from trusted services such as MoneyHelper, Citizens Advice and National Debtline. Our guide to how to get out of debt lists some steps you can take to start reducing what you owe.
What debts do default notices apply to?
Default notices only apply to debts regulated by the Consumer Credit Act, including:
- Credit cards and store cards
- Store finance
- Personal loans
- Payday loans
- Hire purchase agreements.
Debts that aren’t regulated by the Consumer Credit Act include:
- Mortgages
- Utility bills, such as gas, electricity and water
- Debts to local or central Government
- Council tax
- Debts to family or friends
- Debts to unlicensed lenders or loan sharks
- Benefit overpayments
- Taxes
- Some credit union loans
- Charge cards
- Some business debt.
Can employers see my default?
This could depend on the type of job you’re looking for. Most employers will only check publicly available credit information about you, which would show up any County Court Judgments (CCJs) or bankruptcies.
But if you’re applying for a job within the financial sector, then an employer could ask for your permission to run a full check. This means they would then see any defaults on your record.
- Find out more: defaults on your credit file
How do I make a payment if I receive a default notice letter?
If you receive a default notice on your credit card and you can afford to make a payment, you can do so:
- Via an app: most banks offer mobile apps that allow you to make payments quickly and easily
- Via online banking: log into your online banking account to transfer funds directly to your credit card provider.
Alternatively, you can also make payments via telephone banking or in person at a bank branch.
Frequently asked questions
What is the difference between a default and default notice?
A default notice is a letter from a creditor or lender that they must send to you before they register your account as in default. The notice gives you at least 14 days to make a payment to prevent further action being taken.
A default is the actual failure to meet your credit obligations. In other words, when you don’t make the payments on your credit card or loan.
Can I get credit, such as a loan or mortgage, if I have a default?
Having a default on your record can make it more difficult to get credit, but it’s still possible.
Some providers specialise in offering credit cards, loans or mortgages to those with poor credit. However, they are likely to offer you higher interest rates and might place restrictions on how much you can borrow.
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The Editorial Team - Compare the Market
Experts in personal finance, insurance and utilities
Compare the Market’s Editorial Team is made up of industry experts with decades of experience in personal finance, insurance and utilities. Each of our authors has an area of expertise, where they can share their extensive experience to help you get a better deal, by finding the right product and saving money.