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What Are Credit Card Hardship Programs?

Struggling with credit card debt is frustrating enough. But when you add in a stressful life event such as job loss, serious illness or a natural disaster, trying to pay those bills every month can become overwhelming. That’s where a credit card hardship plan may be able to help. Sometimes called assistance programs or hardship cases, these programs can help borrowers weather a financial storm without their accounts going into default. Let’s learn more about credit card hardship programs.              young couple in need of credit card hardship programs

Which creditors offer hardship programs?

Many larger creditors, such as American Express, Capital One and Bank of America offer these plans, but other creditors do too.  The best thing to do is to call each creditor individually to find out if they offer hardship plans and, if they do, find out the steps you need to take to qualify.

How do credit card hardship programs work?

Credit card hardship programs are temporary repayment plans that help you continue paying your bills when you’re going through a financial challenge. The creditor generally lowers the interest rate and waives any fees. This allows more of your payment to go toward paying off the principal debt and helps you make a dent in a large balance. These benefits are usually short term, often just three months, but sometimes longer. After that, the interest rate may return to normal immediately or rise incrementally over time.

Can anyone qualify for them?

Generally, creditors require you to have experienced a major negative life event before approving you for a hardship plan. These can include things like job loss or reduced wages, serious illness, divorce, certain family emergencies or a natural disaster. In some cases, the creditor will ask for proof of the event(s). Keep in mind though, that they evaluate each case individually.  So even if you haven’t been through one these events, you may be able to qualify. In any case, it never hurts to ask.

Are there any drawbacks to hardship programs?

In addition to the terms and conditions of your plan (which vary be creditor), your creditor may take additional action while you’re on the plan which can include: lowering your credit limit, freezing your account or closing it altogether. These actions can potentially affect your credit score by changing your credit utilization and length of credit history. But keep in mind that defaulting on your accounts would have more severe detrimental effects, so you’ll have to weigh the possibilities accordingly.

What are the alternatives to credit card hardship programs?

If you don’t qualify for a hardship program, or you’re overwhelmed by contacting each creditor individually, we can help. Our credit counseling can help you figure out just where you stand financially. We will review your current income, expenses and debt and determine if a debt management plan is a good option. Unlike short-term hardship programs, this long-term repayment plan offers terrific benefits including lower interest rates, waived fees and a path to be debt-free in five years or less. Take our online review to get started, or give us a call now.

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