How to use hardship programs to temporarily suspend credit card payments

Help with credit card debt sometimes comes from an unexpected source—your credit card company.

Contacting your credit card company should be the first move you make if you need some help paying. Many credit card companies have hardship programs to help their customers get out of credit card debt. It’s worth considering what one of these programs might do for you.

What are credit card hardship programs?

Credit card hardship programs are ways credit card companies help their customers pay their bills. This help can take several forms, including:

• Postponing payments

• Reducing monthly minimum payments

• Reducing the interest rate

• Suspending interest charges

These programs do not reduce the amount you owe. They are designed to make your payments affordable, so you can eventually pay off your full balance.

Credit card companies don’t typically advertise these programs, because they don’t want to encourage exceptions to their usual payment policies. Also, how much card companies are willing to work with you varies from issuer to issuer.

The bottom line is that it’s always worth asking what your credit card company might be willing to do for you. 

Be prepared before you call your credit card company

It helps to do a little preparation for talking to your credit card company. Be ready to offer the following:

• The reason for your request. Credit card companies are more likely to work with you if they know your payment difficulties are due to an unusual event like an illness or job loss.

• How long your hardship is likely to affect your ability to pay. It helps if the credit card company can see this is just a temporary problem.

• How much you can pay in the meantime. Do some detailed budgeting before you commit to a number. Be prepared to show you are trying your best to pay what’s owed.

Contact your credit card company as soon as you realize you might have trouble making a payment. They are more likely to work with customers who have generally been up-to-date in the past.

What you should know about credit card hardship programs

A credit card hardship program can be a real lifeline to help you keep up with your payments. Still, you should be aware of some potential drawbacks:

Effect on credit

Your credit report may reflect that your credit card issuer has agreed to special repayment terms on the account. However, this should still be less damaging to your credit history than missing payments. 

Suspension of account

A condition of easier payment terms may be that the credit card issuer won’t let you make any new charges until the debt is paid. This might take the form of a temporary suspension of the account or a lowering of your credit limit. If hardships continue a long time, the credit card company may even close the account.

Continued interest accrual

Note that even if you are given more time to pay, interest may still accrue. This may cause you to owe more interest in the long run.

Penalty interest rate

Be careful to make the scheduled payments so you don’t trigger a penalty interest rate. This is a higher rate of interest charged on late payments. Avoiding it means interest may still accrue over a longer time, but it will accrue at the usual rate.

Whatever terms you work out with your credit card company, get them in writing. This can help you understand the requirements more clearly, and give you proof that the credit card company agreed to exceptions from their normal payment conditions.

Other options to help you get out of credit card debt

A hardship program can help you more easily afford to get out of credit card debt. However, it isn’t always the right answer.

You may not be able to get your credit card company to agree to special terms. Or you may find that even with that agreement, it’s tough to pay. In that case, you do have some alternative forms of debt relief, including:

• Debt consolidation. This means borrowing money to pay off existing debts. It can be a useful way to lower your interest rate, stretch repayment out over a longer time, or simply make it easier to organize your finances by avoiding multiple payments.

• Debt settlement. This is a negotiated agreement to have a creditor reduce the amount you owe. 

• Bankruptcy. This is a legal process for dealing with debt. The most common types of bankruptcy for individuals are Chapter 7 (wipes away eligible debts) and Chapter 13 (a payment plan). It’s sometimes the most effective way to stop creditors from hounding you if there’s no way for you to pay. 

Staying on track after using a hardship program

A hardship problem can get you out of a jam when you get caught short financially. However, these programs are temporary measures. Essentially, a hardship program could buy you time. Use that time to catch up on your payments, and to plan for the future. Figure out a budget that relies on as little debt as possible, and that will ultimately help you keep up with payments without special terms. 

Even though hardship programs are temporary, the chance to get your finances back on track can be a lasting benefit.