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If you're having difficulty paying your credit card bills due to a major financial setback, a credit card hardship program might offer a solution. A credit card hardship plan doesn't eliminate your credit card debt, but it can temporarily reduce your payment obligations to help you avoid missing a payment and potentially damaging your credit scores. Here's how credit card hardship plans work and how to decide whether you should apply.
What Is a Credit Card Hardship Plan?
A credit card hardship plan is an option your card issuer may offer to provide temporary relief for cardholders suffering short-term financial difficulty. Not all credit card issuers offer hardship programs, and those that do generally don't advertise them. Plans can vary depending on your issuer and your situation, but may offer these options:
- Deferred payments
- Temporarily reduced payments
- Temporary reductions in your annual percentage rate (APR)
- Waived late fees or other fees
Credit card hardship plans don't wipe out your credit card debt, but the short-term relief they offer can make it easier to get a handle on your financial obligations.
Who Qualifies for a Credit Card Hardship Plan?
Eligibility for a credit card hardship program can vary by card issuer, but you may qualify if you're having trouble keeping up with your card payments for any of the following reasons:
- Job loss or reduced income: You may qualify if you've lost your job, your hours have been cut or you're otherwise suffering a significant loss of income.
- Medical emergency or serious illness: Facing large medical bills or being unable to work due to an illness or emergency could qualify you for hardship programs.
- Family changes: Divorce or separation, the death of a breadwinner or other major disruption affecting your income could make it harder to pay your credit card bills.
- Natural disaster or similar emergency: An unexpected event such as a flood, fire or earthquake could qualify you for a credit card hardship plan if it significantly disrupts your finances.
Keep in mind that eligibility will be determined by your card issuer, and you'll likely need to provide documentation of your hardship issues.
Do Credit Card Hardship Programs Affect Your Credit?
A credit card hardship program could affect your credit scores depending on how the card issuer handles your account and whether the program helps you avoid missing payments.
A credit card payment that's 30 days late can be reported to credit bureaus as past due, which can significantly lower your credit scores. If a hardship plan enables you to keep your account from becoming past due, it could help you avoid damaging your credit. Even if you have one past-due payment, a hardship program that saves you from falling further behind can help prevent additional harm to your scores.
Other ways a credit card hardship plan could affect your credit scores include:
- Plan enrollment reporting: If your enrollment in a hardship plan is reported to credit bureaus, it may not directly impact your credit scores. However, your enrollment may be visible to lenders and others checking your credit report, which could factor into their decisions.
- Credit utilization: If the card issuer lowers your credit limit, your credit utilization ratio can increase, which can hurt your credit scores.
- Account closure: If the card company closes your account, losing that available credit could increase your overall credit utilization. Closing an account can also eventually reduce the length of your credit history, which can hurt your credit scores.
- Other debts: A credit card hardship program could make it easier to pay down debt and free up cash for timely payments on your other debts, which could help improve your credit score.
Learn more: How Important Is Credit Card Utilization to Your Credit Score?
What to Consider Before Agreeing to a Credit Card Hardship Plan
Before accepting a credit card hardship program, ask these questions:
- What documentation is needed? You may be asked for pay stubs, divorce papers, medical bills, bank statements or other proof of financial difficulties.
- What relief will I receive? Will you have lower payments, a lower APR, deferred payments or waived fees?
- Can I afford the new payment? Reduced payments won't help if they still don't fit your budget.
- What are the ongoing requirements? Do you have to set up autopayment or work with a credit counselor? Will missing a payment expel you from the program?
- How long will the plan last? Find out when normal terms resume and what you'll owe when the plan ends.
- How will my credit card be affected? Will the issuer freeze your card so you can't use it, reduce your credit limit or close the account?
- How will my account status be reported? Find out how the issuer will report the account to the credit bureaus.
Keep records of phone conversations, emails or online chats. Get all the details of the plan in writing before signing or agreeing to anything.
Tip: Credit card companies generally work with hardship customers on a case-by-case basis. If their first offer doesn't seem likely to help you, ask about alternatives.
Alternatives to Credit Card Hardship Plans
If your card issuer doesn't offer a credit card hardship program, you don't qualify or the terms of the plan won't help your situation, there are other options you can explore.
- Ask your card issuer for a lower APR. Even a small interest rate reduction could help. While rate reduction is often a feature of hardship programs, it could be available without enrolling.
- Consider a balance transfer card. If you have good credit, a credit card with an introductory 0% APR on balance transfers lets you transfer your high-interest balance onto the new card and get a temporary reprieve from interest. You'll typically pay a fee of 3% or 5% of the transferred amount.
- Consider debt consolidation. A debt consolidation loan can consolidate multiple credit card balances into one fixed monthly payment and could reduce interest costs if you can qualify for favorable terms.
- Request loan accommodations. Contact the lender servicing your auto loan, student loan or mortgage to see if they offer loan deferment, forbearance or other hardship options. This can help you reduce expenses so you're better able to pay down your credit cards.
- Work with a credit counselor. A nonprofit credit counselor can help you develop a budget and figure out repayment options. In some cases, they may recommend a debt management plan, which involves negotiating with creditors to reduce your debt and pay what you owe. You'll likely have to close your credit cards that are part of the plan, however.
- Seek financial assistance. National, state and local financial assistance programs provide assistance with rent, food, utilities and more.
Learn more: What Is a Debt Management Plan?
The Bottom Line
If temporary financial problems are making it difficult to pay your credit card bills, a credit card hardship plan could offer some relief. Contact your card issuer before you fall behind on your payments to see if assistance is available.
As you navigate your financial hardship, it's a good idea to keep tabs on your credit. You can check your credit report and FICO® Score☉ Θ for free from Experian. Consider signing up for Experian's free credit monitoring service too. You'll be able to track your FICO® Score progress and get alerts of important changes to your credit report.