Credit Cards and Debt

We are a credit-driven culture, and our credit cards and loans offer important support when times are tight.  So, if the pandemic has taken your income, you may be relying on credit to meet basic needs.  

Then again, credit card debt adds up quickly and can have considerable costs in interest and penalties if you cannot make payments.  Which may cause much longer-term problems.

The main tip on navigating credit and debt issues is to contact your lender directly and ask. Many banks and credit card companies are ready to work with you.  Most banks and financial institutions are offering some kind of suspension on payments and fees, reduced interest, or other relief but you have to call and ask.  

It is worth the time on hold.

Credit Card Relief Programs

There are several ways that credit card companies are offering relief.  To take advantage of these programs in any case, you’ll need to reach out to your creditors directly.  We explain some tips for doing so below.

Now, your company may not have any relief program, but if they do it may include one or more of the following:

  • Lowering or deferring monthly payments.
    A lot of companies have implemented some form of emergency forbearance, allowing one to skip or reduce payments for a limited time.  They may temporarily suspend transactions or otherwise change limits as well, and when the forbearance period ends you may need to make up skipped or reduced payments eventually.
  • Waiving or refunding late fees.
    Usually missing a payment leads to fees. During the pandemic, many are making exceptions, waiving or refunding late fees if you request relief.
  • Reducing interest rates.
    Some cards charge as much as 25% or even 30% APR on balances.  They probably won’t suspend interest entirely, but they may be able to temporarily reduce the rate during hardship.
  • Establishing a payment plan.
    If your income has been reduced or you otherwise can only afford a partial payments, the bank may be willing to accept lower payments for a time.

Requesting Help from your Creditors

Missing a payment on your credit card or paying it late can result in fees or added interest, but it can also have a negative impact on your credit score. This is why it’s important to contact your credit card companies immediately if you know you can’t pay your bill.

Here are important steps to requesting relief:

  1. Tell them you’ve been impacted by the coronavirus pandemic.
    First and foremost, make sure to tell them you’ve been financially impacted by the coronavirus pandemic and need help.  Most credit card companies are currently offering programs if you’ve lost income because of the pandemic, as mentioned above. Be prepared to provide documentation about your current situation.

  2. Ask questions about the credit card relief packages they offer
    While your credit card company may offer up one or more options, have a list of questions prepared in advance. You want to make sure you’re completely comfortable with the terms before you agree to these options.
    Here are key questions to ask:

     

    • If I can’t make my payment as a result of the coronavirus pandemic, do you have a financial relief program?
    • Are there fees associated with these options?
    • If I’m able to defer or lower my monthly payments, will interest continue to accrue during this relief period?
    • How long does the relief period last and when will I need to start repaying my bill?
    • What happens if my financial situation hasn’t changed once the period ends? Is there an option to reevaluate?
    • What information will be reported to the credit reporting agencies?
    • Will I lose the ability to charge anything to my card if I enroll or request relief?

  3. Get a written copy of your agreement
    If you choose to move forward with a financial relief option, it’s important to understand the terms of the agreement before agreeing to anything. Once you’ve accepted a relief option, make sure to get a copy of the agreement in writing. During the relief period, you want to make sure to look at your statement each month for any errors or inaccuracies, and if you see anything, make sure to refer back to the agreement so you can dispute it.

How to stay on top of your credit card bill

If you can’t make your payments, you’re likely facing a number of tough financial decisions, but even in difficult times, there are several good rules of thumb that can help you stay mindful of the credit card debt you have, so you’re ultimately able to recover quicker.

Make your minimum payment, if possible

This may be difficult guidance if you’ve lost your income and you’re having to prioritize your bills. There may be cases, though, where you get financial assistance from your credit card companies, but your interest continues to accrue. If this is the case, making the minimum payment–and making it on time–could help ease the burden later on.

Pay attention to your bill and look for errors

If you think there’s been an error on your credit card statement, send your credit card company a billing error notice that disputes the charge.

Under normal circumstances, your credit card company has 30 days to confirm receipt of your notice as well as two complete billing cycles – but no more than 90 days – to investigate and respond to you.

However, as a result of the coronavirus pandemic, many card providers are facing operational challenges. This means that, in some cases, you may find that your credit card company is taking longer than 90 days to complete the billing error investigation.

The Bureau recently issued a statement  informing creditors of the Bureau’s flexible supervisory and enforcement approach regarding the maximum timeframe for billing error resolution, if the credit card company can show good faith efforts to obtain the necessary information and make a determination as quickly as possible, and complies with all other requirements pending resolution of the error.

No matter how long the billing error investigation takes, the credit card company can’t do any of the following while the billing error is being investigated:

  • Ask you to pay the amount in dispute
  • Report the amount in dispute as “unpaid” to credit reporting agencies
  • Close your account solely because you filed a billing error notice that was in good faith

Check your credit reports regularly

You can typically check your credit reports for free, once a year. However, the three major credit reporting agencies – Experian, TransUnion and Equifax – are currently allowing consumers to check their reports weekly for free .

If you sign-up for a credit card relief package and are meeting the terms of that relief package, such as making a lower minimum payment, the company must report to the credit reporting agencies that you are “current” on the account. However, if you were already behind on your payments at the time you receive relief, the lender is not required to report that you are current.

And, if you find an error, you should work to dispute it, this is when it would be helpful to have a copy of the written agreement on hand.

Learn how to protect your credit during COVID-19

Know your debt collection rights

If you have a debt in collection or a collector is attempting to contact you, it can make a tense time feel even more stressful.

It’s important to first verify their identity to make sure it’s a legitimate collector, but you also have a number of rights and collectors can work with you on realistic repayment plans.

Learn more about your debt collection rights, including how to contact and negotiate with collection companies

Other loans, debt and financial relief

 
Photo by Paul Felberbauer on Unsplash

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