If You Can’t Pay Your Credit Card Bills This Month, Here’s What You Can Do

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If you’re planning on traveling this summer or making a big purchase soon, you’ll probably want to make sure all of your credit card debt is paid off first. But if that’s not an option, you’ll need to act fast to prevent any damage to your credit score.

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Nearly 60% of Americans are living paycheck to paycheck, reports Pymnts.com. And as inflation continues to rise, credit card customers continue to struggle to make their credit card Minimum PayoutAs a result the credit score will deteriorate and consumers will have to pay increased interest.

The average credit card balance for Americans is $5,910, according to CNET sister site Bankrate. And there is growing concern that many credit card accounts will become delinquent as borrowers fall behind on payments.

If you’re having trouble paying off your credit cards, we have some options that can help you stay on your feet while you pay your bills. For more information, see here Best credit cards to pay off debt,

1. Call your credit card company and explain your situation

As soon as you become aware that you will not be able to make your minimum payment, contact your credit card company to let them know your situation. If the company is unaware, it may assume the worst and take action. Notifying your credit card provider can help avoid any bad consequences and keep you in control.

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

Whatever work you do, get details of it in writing. Bruce McCleary, senior vice president of communications at the National Foundation for Credit Counseling, told CNET that you should make sure you get official confirmation of any changes to your account and terms from your credit card issuer in case things don’t work out. . The way you thought they would do it.

Credit card issuers may also have forbearance or hardship programs (see below) that do less damage to your credit score than going into arrears (an overdue account) or having your account charged off, meaning it has to be repaid without any damage. are written down and locked away for future charges. , When this happens, your credit utilization ratio increases, which can cause your credit score to drop. It can also reduce your credit history, which impacts your credit score.

American Express and Chase Credit Cards American Express and Chase Credit Cards

If you can’t make your payments, contact your lender as soon as possible.

James Martin/CNET

2. Try credit counseling or debt management programs

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

McCleary explains, “A debt management program allows you to get back on track in an affordable way within your budget, while also benefiting from lower payments and interest rates until you have your accounts paid off.” Is.” 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 work out a new payment plan.

Rod Griffin, senior director of consumer education at Experian, suggests contacting your attorney general’s office or the Consumer Financial Protection Bureau, as well as checking Consumer.gov for all your local options.

3. Rework your budget and find places to save or earn more

If you’re struggling with budgeting issues that are making it difficult to pay your bills, consider cutting back on any unnecessary monthly expenses and applying for government assistance. There are programs that may give you an allowance to pay your energy bills – for example, the Low Income Home Energy Assistance Program. States also provide rental assistance as well as Temporary Assistance for Needy Families, which helps with food, housing, home energy, child care, and job training.

Next, consider canceling streaming services Or cable, cutting down on purchases and returning unnecessary recent purchases. Try to eat at home more often and consume less restaurants and specialty coffee. Work from home if possible Save Money on Gas, You can also use “Pay as you go” car insurance options 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 opportunities to save, start looking for additional ways you can make more money. Remove unwanted items from your storage closet and used electronics And list them for sale on apps like eBay, Mercari, and Poshmark. You can do this start a side hustle Or sign up to become an Uber or Lyft driver. You can also rent your car tour When you are not using it.

4. Transfer Your Balance to a 0% Intro APR Credit Card

If your credit score is still good enough – for example, you haven’t missed any payments yet – consider applying for a loan. 0% Introductory APR credit card and Transferring your balance, 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 a 0% intro APR card can help when trying to pay off credit card debt. Can save your time and money.

However, if you’re already in financial trouble and can’t make your current minimum payment, this may not be the best option for you as you’ll still be expected to make payments on your new card, even ​Even during the introduction period. If you don’t do this, your 0% APR period may end early.

If you can’t get approved for the 0% intro APR and you have multiple credit card balances, consider applying for debt consolidation loan, Your loan will still charge interest, but you’ll only have to make one payment and you may get a lower rate overall.

Three credit cards stacked up Three credit cards stacked up

A credit counselor can help find solutions to make payments more sustainable.

Sarah Tew/CNET

Disadvantages of Credit Card Hardship Programs

Although you won’t see them advertised much, many creditors offer hardship programs that help you pay off your credit card debt. Terms vary by lender, but can include options like skipping payments or lowering your minimum payment or your APR. Generally, you’ll need to apply for the program by contacting your creditor, but there may be some conditions. For example, you may have to provide proof that you’re experiencing a hardship.

However, the program has some disadvantages that can hurt your credit score. Here’s what they are.

1. Settling your loan for less than originally agreed

If you settle your debt for less than originally agreed upon – for example, if your original debt was $15,000, but you settled for $10,000 – it could hurt your credit score because you didn’t meet your original obligation. Is. On the other hand, McCleary says that while you’re focused on paying off your credit cards, you should prioritize settling your debt over your credit score — over different credit components than paying off your debt. Attention will have a much bigger long-term impact than anything else.

2. Issuers may reduce your credit limit or close your account

The credit card company may reduce your credit limit or even close your account while you are making payments, which will damage your credit score. A lower credit limit will affect your credit utilization ratio (the sum of your balances compared to your credit limit) – a key part of the credit score – because your total credit utilization 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 credit utilization ratio and length of credit history are two important factors in your credit score.

3. Signing up for a hardship program in general

Signing up for a hardship plan can indirectly hurt your credit score, WalletHub analyst Jill Gonzalez told CNET. “Your credit card issuer may put a note on your credit report that could alert other potential creditors to your financial problems.”

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 it is How to get out of credit card debt, Furthermore, here is What to know about debt consolidation And how it hurts and helps your credit.

If you want to build your bad credit but need tools, check out our recommendations for best credit cards for bad credit And Best credit cards for fair and average creditUsing these cards in combination Best Practices to Increase Your Credit Will help in strengthening your financial position.

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