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Ask the experts

Ask the Experts – November 2020

Many people are reluctant to talk about money. In some instances, it’s because the person believes that discussing finances with others is rude or impolite. In other cases, people may be unwilling to talk about money because they consider it to be a private topic that should only be discussed with close family members. Others hesitate when it comes to discussing finances because they’re worried about making a mistake or saying the wrong thing.

Whatever the reason, people who don’t talk about money, budgets, and finances could be missing out. When you discuss money, you learn things that you wouldn’t have otherwise known. This can help you come up with different strategies for managing your money and staying on budget.

That’s why, each month, our financial experts answer a selection of the money questions we receive.

If you have a question for our team, ask us online on FacebookTwitter or through our website.

The questions here have been condensed or rewritten for clarity and simplicity.

What Happens if I Don’t Pay My Credit Card Bill?

There are two possible situations you may be referring to here. One is a situation where you don’t pay off your bill in full while the other is where you don’t pay your bill at all.

If you don’t pay your credit card bill in full, you’ll be charged interest on the outstanding amount. Most credit cards charge high interest rates, so carrying a balance on your card can get very costly. If you only make the minimum required payment, for example, the credit card provider won’t get upset with you, but you’ll end up paying a very large amount of interest. If you continue to only pay the minimum, it will take you a very long time to pay off your debt and you’ll end up paying a lot more money than you initially borrowed.

If you don’t pay your credit card bill at all, this will negatively affect your credit score. Your credit score is a three-digit number that is calculated using the information in your credit report. Your credit report contains details on every loan you have borrowed in the last six years, including how often you make payments. The more often you miss payments, the more your credit report will be negatively affected. If you have poor credit, it’s hard to get new loans and you’ll pay a lot more in interest on the loans you are able to get.

Also, if you don’t pay your credit card, the creditor could send a collection agency after you and they may even take legal action against you. This is why it’s crucial to pay your bills on time and to pay more than the minimum whenever possible.

How Do I Know if I Have Too Much Debt?

Almost everyone has some debt, and a reasonable amount of debt can be manageable for most people. However, if you have too much debt, it’s easy to get overwhelmed and wind up in financial trouble.

So how do you know if you have too much debt?

Here are a few signs that you could owe too much:

  • All of your money goes towards debt.
    • If you have nothing available for savings or other financial goals because you’re spending all of your money on debt repayment, you likely have too much debt.
  • You can only make minimum payments
    • If you’re not able to make more than the minimum monthly payment on your credit card, you could have too much debt.
  • You pay bills late
    • If you end up paying bills late because you don’t have the money available, you could have too much debt.
  • You’re not sure how much you owe
    • If you can’t keep track of how much you owe or who you owe money to, there’s a good chance that you have too much debt.
  • You’ve borrowed money to pay bills
    • If you have to pay one credit card with another, take out a payday loan to make ends meet, or borrow from friends and family to pay your bills, you may have too much debt.
  • You worry about money a great deal
    • Everyone worries about money sometimes, but if you can’t sleep, can’t focus at work, or are unable to socialize because you’re worried about debt, you’re likely in a negative financial situation and you may owe more than you can handle.

If you have more debt than you can afford to repay, talking to a Licensed Insolvency Trustee can be a good idea.