Credit is money you borrow from a financial institution like a bank or credit union. 

This money is yours to spend as you see fit, however, credit isn’t your personal money tree. Any money you borrow is debt until you pay it back -– usually with lots of extra costs on top of the amount you borrowed, such as interest, fees, and charges.

When you can’t afford to pay the debt, this is called a credit hangover. And it isn’t fun! 

How to avoid credit hangover 

Know before you borrow 

Before you sign up for a credit card or loan, make a budget — this will let you know how much money you have coming in or going out. This will give you an idea if you have enough money to pay the credit card or loan debt. 

Do some research

Is this the best offer you can find? Are there other banks with less fees? Make sure that you are getting the best deal you can before signing up!

Understand the contract 

Read through the contract thoroughly before you sign – know your responsibilities and make a plan as to how you are going to fulfil your obligations. 

Use a debit card when you can 

A credit card may seem attractive – with rewards and a cushion of extra cash – but credit card debt can really cost you. A debit card is a safe option because you know exactly how much money you have and you can’t accidentally rack up charges. 

Check out the MoneySmart Rookie website for more info on credit and debt. Or this video on how to avoid credit hangovers. 

Look at our article on how to get out of debt for more information.

If you are having a financial emergency

If you are in need of money urgently, Money Smart has great Australia-wide information and contacts for housing, income support, emergency relief and financial counselling. The Department of Human Services also has some helpful information on crisis and special help payments that you might be eligible for. 

Check out Financial Counselling Australia to find a counsellor near you, or call 1800 007 007 to speak to one on the phone for free advice.

You can also call the National Debt Helpline, they are open every weekday from 9.30am-4.30pm and their chat is open until 8pm. They offer free counselling to figure out a debt solution that will suit you. 

Aboriginal and Torres Strait Islander people can call Mob Strong Debt Helpline on 1800 808 488. Monday to Friday, 9.30am to 4.30pm.

If you are in debt, call Way Forward on 1300 045 502. Monday to Friday, 9:00am to 7:00pm. If you’re in financial hardship, they can arrange a debt repayment plan on your behalf. This is a free service.

If you are struggling with your mental health in this hard time — please reach out. Call Beyond Blue on 1300 22 46 36, 24 hours a day. Or use their live chat service, available 24 hours a day.