Can’t pay your credit card bill this month? Here are some options

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What is happening

Two-thirds of Americans live paycheck to paycheck, making it harder to pay their bills on time.

why is it important

Late payments can hurt credit rating, leading to even bigger financial problems.

Bring together credit card debt is easy to do, especially if you’re not looking at your transaction history to see how much you’ve spent — you can find a summary of your spending, your balance, and the minimum payment due on your monthly credit card bill or through your online account.

Your minimum payment is the lowest amount you can pay each month without penalties. If you are experiencing financial difficulties, it may be difficult to pay the minimum amount required, which may result in missed payment.

9% of consumers missed at least one credit card payment in 2021, according to a Harris Poll survey. And this year, without a federal government stimulus checks and child tax credit payments to help soften the blow of runaway inflation, credit card balances soared.

Meanwhile, credit card interest rates have risen along with the of the Federal Reserve rate hikes. There are growing concerns that many credit card bills may be overdue as borrowers fall behind on payments, Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling, told CNET.

“These credit card users are feeling the impact of interest rates and fees when balances roll over each month, especially with prices rising across the board,” McClary said.

If you’re having trouble making your credit card payments, we have a few options that can help you stay on your feet while you try to pay your bills. To find out more, here are the best credit cards to pay off debt.

Contact your credit card company and explain your situation

As soon as you discover that you will not be able to make your minimum payment, contact your credit card company so that they are aware of your situation. If the company is unaware, it might assume the worst and take action.

“Give them the opportunity to pitch potential solutions and explain how you can take advantage of them,” McClary said. Telling your credit card provider can help you avoid bad consequences and stay in control of your situation.

Your credit card company may be able to work out a payment plan that you can afford. The lender might also move your payment due date so it works better with your paycheck. It might also be possible for you to negotiate a lower APR – the annual interest you pay on your credit card balance.

“If it’s a situation where someone is facing temporary hardship that will resolve itself in a few months, there are programs that give people the ability to skip payments without penalty,” McClary said.

Creditors would rather work out a plan with you than sell your debt to collectors. Rod Griffin, senior director of consumer education at Experian, agrees. “Ask them for help,” he said. “They want to be paid as much as you want to pay them.”

The credit card issuer may also have relief or hardship programs (see below) that hurt your credit score less than having arrears (a delinquent account) or having your account debited . A “debited” account means that it is written off as a loss and closed to future charges. When this happens, your credit utilization rate increases, which can lower your credit score. It can also decrease your credit history, which impacts your credit score.

Whatever you do, McClary advises that you make sure you receive written confirmation and terms from your credit card issuer in case things don’t go your way.

American Express and Chase credit cards

Contact your lender as soon as possible if you cannot make a payment.

James Martin/CNET

Evaluate your budget and identify opportunities to save or earn more money

If you’re having budget issues that keep you from paying your bills, consider cutting unnecessary monthly expenses and seeking government assistance. There are programs that can give you a stipend to pay your energy bills – for example, the Energy Assistance Program for Low Income Households. States also provide housing assistance, as well as temporary assistance to needy families, which helps with food, housing, home energy, childcare, and job training.

Then remember to cancel streaming services or cable, reducing purchases and returning unnecessary recent purchases. Try to eat at home more often and cut back on specialty restaurants and cafes. If possible, work from home save money on gas. You can also use a “pay as you go” possibility of car insurance if you don’t drive often. These small changes may not be enough to cover your bills, depending on how much you owe, but the money you save can still add up in the long run.

Once you’ve identified your savings opportunities, start looking for other ways to earn more money on the side. Go through your storage closet for unwanted items and used electronics and list them for sale on apps like eBay, Mercari, and Poshmark. You could start a side business or sign up to be an Uber or Lyft driver. You can also rent your car on tutorial when you are not using it.

Transfer your balances to a credit card 0% intro APR

If your credit score is still good enough – for example, you haven’t missed any payments yet – consider applying for 0% launch APR credit card and transfer your balances. You’ll typically need a credit score of at least 670 to take advantage of one of these cards, but transferring your credit card debt to an introductory 0% APR card can save you money. time and money when trying to pay off your credit card debt.

However, if you are already struggling financially and cannot make your current minimum payment, this may not be the best option for you as you will still need to make payments on your new card, even during the period. of introduction. If you don’t, your 0% APR period may end sooner.

If you are unable to get approved for a 0% introductory APR and have multiple credit card balances, consider requesting a debt consolidation loan. Your debt will still earn interest, but you’ll only have to make one payment and you might get a lower overall rate.

Consider credit counseling or a debt management program

Another option for getting help with credit card debt is to seek out nonprofit credit counseling agencies or debt management programs that can help with budgeting.

“A debt management program gets you back on track affordably within your budget, while also benefiting from lower payments and interest rates until you pay off your accounts. “, explained McClary. These programs can help you find a long-term solution with your creditors based on your budget, making payments more sustainable. They can also negotiate with creditors on your behalf to create a new payment plan.

Griffin suggests contacting your attorney general’s office or the Consumer Financial Protection Bureau, as well as checking Consumer.gov for all of your local options.

three stacked credit cards

A credit counselor can help you find a solution to make payments more sustainable.

Sarah Tew/CNET

What about a hardship program?

Although you may not see them advertised much, many creditors offer hardship programs that help you pay off your credit card debt. Terms vary by lender, but may include options such as skipping payments or reducing your minimum payment or APR. Generally, you must apply for the program by contacting your creditor, but there may be certain stipulations. For example, you may need to provide proof that you are having difficulty.

However, the programs have some drawbacks. If you settle your debt for less than originally agreed – for example, if your original debt was $15,000 but you settled for $10,000 – it could hurt your credit score because you have not fulfilled your initial obligation. On the other hand, McClary adds that while you’re focusing on paying off your credit cards, you should prioritize paying off your debt over your credit score – paying off your debt will have an effect. much more important in the long term than obsessing over isolated credit items. .

You’ll have to develop a thick skin towards your credit score, anyway. Simply signing up for a hardship plan could indirectly hurt your credit score, WalletHub analyst Jill Gonzalez told CNET. “Your credit card issuer may put a note on your credit report that may alert other potential creditors to your financial troubles.”

The credit card company might reduce your credit limit or even close your account while you make payments, which will affect your credit score. A lower credit limit would impact your credit utilization rate (the sum of your balances compared to your credit limits) – a major component of credit scores – as your total credit used will increase.

If your account is closed later, your average credit age (the length of all your accounts divided by the total number of accounts), another credit score component, will decrease. Your rate of credit utilization and the length of your credit history are two important factors in your credit score.

Because of the potential negative consequences of hardship programs, Griffin says it may be best to work through a good relief program with a financial advisor instead.

For more information, here how to get out of credit card debt. Also, here what you need to know about debt consolidation and how it hurts and helps your credit.

If you want to build your bad credit but need some tools, check out our recommendations for the best credit cards for bad credit and best credit cards for fair and average credit. Using these cards in conjunction with good practices to boost your credit will help protect your financial situation.

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