The impact of the Coronavirus pandemic has affected millions of Americans, especially when it comes to finances. With mounting business closures and job losses, many people find themselves suddenly having trouble paying for their credit card and other bills. As a result, some have used credit card deferments with the COVID federal hardship program to help ease the financial burden.
But what happens once these deferments expire? Sadly, most will be faced with a large number of backlog payments, which is often even more challenging to pay off.
If this is your situation, the good news is that you have several options at your disposal.
Coronavirus Credit Card Debt Relief Programs
Aside from government help with credit card debt, you can also ask your credit card provider if they offer credit card debt relief programs (and they often do). What credit card companies offer may vary, so the key is to ask them right away and start exploring your options.
Here are some of the common debt relief programs you’ll encounter:
● Credit Card Payment Deferral Programs
Debt deferment and emergency credit card forbearance are what your credit card company will usually offer if you ask them for financial assistance. It allows you to temporarily lower or skip payments during a specified period. Of course, you’ll still need to pay the monthly dues that you missed, but often not right away as long as you pay the minimum amount each month.
A deferment is an excellent option because it gives you breathing room to recover financially. However, do realize that it might increase your monthly payments in the future, or stretch out your terms and keep you in debt for longer.
● Lowered Interest Rates and Late Fees
Some credit card companies might lower your interest rate or waive late fees during a specified period, then return it to normal once the crisis ends. A lower interest rate can be advantageous because it can prevent your card debt from ballooning further. However, note that you’ll still need to make regular payments, which isn’t ideal for those whose income source has been completely cut off.
● Alternative Payment Plans
One last option you can try is to negotiate an alternative payment plan with your credit card provider. This is useful if you’re only able to pay a portion of your monthly bill, due to reduced income or hours at work.
How to Handle Backlogged Credit Card Payment Deferment
A large backlog of debt payments might seem impossible to pay off at first. However, there’s always a way out of any financial situation. Here are some of the things you can do to help you climb that mountain.
First, you need to assess your current financial standing. You do this by listing all of your income sources and tracking all your expenses.
Once you have a realistic picture of your finances, it’s time to create a budget. Analyze your spending habits and figure out where you can cut back. Maybe you don’t need to have that coffee every morning after all. Every bit of money you save can go towards repaying your debt. You can also look into the many excellent debt repayment strategies to help chip away at your credit card debt.
When people implement proper budgeting, they often find out they had the means to pay off their debts after all.
However, if you have significant credit card debt, paying it back through normal means might be impossible. That’s where getting debt relief like credit counseling or debt settlement comes into play.
Credit counseling can help you get back on track financially by giving you advice on debt and money management. Counselors will often take an in-depth look at your financial standing and even offer a customized debt plan for you.
You can also try debt settlement. This is where a third party negotiates with creditors on your behalf to try and resolve your debt. They will push for a lump sum payment to creditors, which is often less than what you owe to them originally.
Debt settlement is a fantastic option, but it does have its risk. The biggest one is that your creditors are under no obligation to settle, so you might not be able to pay off all that you owe. You also need to pay regular monthly payments to a special account, and most people simply cannot keep up with this long enough to finish the settlement.
You should also be especially wary of dishonest companies running debt settlement scams. They will often ask for an upfront fee before they settle any of your debts. Always do your research on potential debt settlement companies before committing to any of them. Look at customer complaints and reviews in particular, as well as any promises and guarantees that sound too good to be true.
If all else fails and you still can’t meet any monthly payment commitments, maybe it’s time to consider bankruptcy. Before doing this, however, we recommend consulting with a lawyer who specializes in bankruptcy.
Tip for Paying Credit Card Debt
When you have a backlog of credit card debt payments, it’s vital that you don’t add to it further. A ballooning balance can become almost impossible to pay off for someone who’s struggling financially. To avoid this, try to settle your current credit card bills as they come.
Here are some other tips on paying your credit card bill before it becomes a bigger problem:
● Check your Credit Card Bill Thoroughly
Here’s one benefit of tracking your expenses accurately: you can monitor your credit card usage, too. This allows you to spot errors and discrepancies in your monthly statements, and dispute it immediately. Card companies typically have 30-90 days to confirm and respond to your complaints.
Errors on your bill (as long as it was reported in good faith) can buy you time because credit card companies cannot ask you to pay while a billing error is still unresolved. They also can’t report your amount due as “unpaid” against your credit rating.
Things to Avoid When Paying Credit Card Debt
Finally, when you’re dealing with credit card debt, some actions can cause your situation to worsen. Here are some that you need to avoid:
● Withdrawing Money From Your Retirement Fund
No matter how desperate you get in repaying your debt, never get money from your retirement savings. Doing so is basically like robbing from your future self, and will most likely create more financial problems later in life.
● Borrowing Against Your Home
Taking out a home equity loan is another dangerous proposition and one that you should avoid at all costs. Doing this risks your home to foreclosure in case you can’t repay the loan. Also, you’re essentially turning unsecured credit card debt into a secured debt, which can’t be removed if you file for bankruptcy.
● Give into Debt Collector’s Demands
While debt collectors can be demanding and persistent, you should never make a payment decision based on their pressure alone. Remember, debt collectors don’t have your best interest at heart; they only want to get paid regardless of the method.
Why Use CreditAssociates for Credit Card Debt Relief
If you’re thinking of using debt settlement to pay off your credit card debt, consider CreditAssociates. Throughout the years, we’ve helped thousands of people settle over millions of dollars in credit card debt.
Our team of debt experts can help you successfully settle your debts at only a fraction of your monthly payments, in as little as 24-36 months. We make it a point to know your financial situation, so we’re in the best position to negotiate with your creditors on your behalf.
The best time to start tackling your debt is right now. Schedule a free consultation with our debt experts today, so you can finally get your debt-free life back.