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do's and don't of credit cards during a crisis

The COVID-19 pandemic is having an ongoing effect on American’s lives in many ways. One of the most universal is its impact on people’s finances. Record numbers of laid-off or furloughed workers apply for unemployment benefits each week. Additionally, many Americans have or will soon receive economic impact payments, designed to help supplement reduced income and stimulate the economy. Yet, even with this assistance, many must turn to credit cards to help make it through. Check out these do’s and don’ts of using credit cards during a crisis.   do's and don't of credit cards during a crisis


Focus on Essentials

In a crisis, it’s fine to use credit cards to pay for things you normally wouldn’t use them for, such as groceries, gas for your vehicle or to pay utility bills or insurance premiums.

Find the Lowest Interest Rate

Use your credit with the lowest interest rate. If your credit is in good shape, try opening a new card that has a 0% (or very low) initial interest rate. It will help you save money in the long run.

Negotiate a Lower Rate

You may be able to negotiate a lower interest rate on one or more of your current credit cards. Contact the card company to let them know you’ve been affected by the pandemic and see what types of relief they are offering. Here’s a list of creditors to get you started.

Keep Making Payments

Even if money is tight, you want to keep making at least minimum payments to keep the account in good standing so you can continue using it, if needed. Of course, you should pay as much each month as your budget allows, to help avoid excessive interest charges.

Ask for a Credit Limit Increase

If you’re concerned you may max out your card, apply for a credit limit increase before that happens. That will help your credit utilization ratio, which is a major factor in determining your credit score.


Charge Things You Don’t Need

Avoid using your credit card to buy things you don’t need right now. It can be tempting to treat yourself and deal with it later. But the momentary satisfaction won’t last — especially when you see your next credit card bill.

Stress About Your Credit Score

Your credit score might take a hit if you open a new card or exceed the optimum credit utilization ratio, but try not to stress about it. You can focus on paying down new debt and getting your score back up when the crisis passes.

Rely on Cash Advances

A credit card cash advance should be a last resort financial solution. That’s because you can run up your credit limit and face higher interest rates on cash advances than purchases. If you must have cash, inquire with your bank or credit union about a personal loan.

Stop Making Payments

Once again, you want to make at least the minimum monthly payment (or more) until you’re out of the crisis. Doing so will help preserve access to credit and help safeguard your credit score.

Wait to Get Help

When the crisis passes, you’ll want to start paying off the new credit card debt right away. If you’re not sure how to proceed, we can help. Take our free online financial review or call to speak with a certified credit counselor. We’ll help you plan a budget and recommend a solution to help you pay off credit card debt as quickly as possible.

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