Credit Card Assistance Program: How It Works

Whether you’re out of work due to health issues, suspended from work due to an accident, facing a mountain of medical bills, hit by a natural disaster, or struggling financially due to a divorce, a credit card program may offer you some relief in paying your bills. accounts.

“There are many things that can make it difficult to pay your bills,” says Mike Sullivan, personal financial advisor at nonprofit consumer finance agency Take Charge America. “A coping plan can be very, very helpful for consumers.”

While you may never have heard of such a program, Sullivan explains that most credit card issuers are very familiar with them and provide them to cardholders on a regular basis under certain circumstances.

So what is a credit card assistance program and how does it work?

What is a credit card assistance program?

Credit card assistance programs are designed to help consumers get through periods of financial turmoil without giving up on their credit cards.

Some credit card companies charge a late payment fee of up to $40, while the average credit card interest rate is currently just over 16%.

“It can be very discouraging,” Sullivan says. — How do you manage?

That’s where a credit card assistance program can help.

Programs can vary from issuer to issuer and consumer to consumer, says Melinda Opperman, president of Credit.org, a nonprofit consumer credit advisory agency.

Under such programs, interest payments may be temporarily reduced or waived, payments may be reduced, late fees may be waived, and payment terms may be extended. These changes could end up saving you thousands of dollars in interest and fees.

Given the differences in issuer programs, it is important to get all terms and conditions in writing. This way, you can refer to them when you are dealing with your financial difficulties and avoid unintended financial problems due to misunderstandings.

How can you qualify?

You can contact your credit card issuer directly and ask about their hardship assistance program, or ask a nonprofit consumer credit counseling program for help, Sullivan said. “But not everyone gets it just because they ask.”

While anyone can apply for a hardship relief program, credit card issuers may be more likely to grant a request to someone with a solid credit history, Sullivan said.

While many major card issuers have offered assistance to cardholders during the COVID-19 pandemic and have streamlined their assistance programs to make it easier to participate, most of these programs have been scaled down.

What else should be kept in mind?

Because every card issuer is different, it’s important to make sure you understand the terms of your agreement and get them in writing. Here are some things to keep in mind:

• Hardship assistance programs usually last no more than 12 months. Use this time to develop a plan to pay your bills after the end of the program.
• Your account may be frozen, which means you will not be able to make new purchases with the card.
• Your issuer may continue to charge interest while you are in the Hardship Assistance program, so your card balance may continue to increase.
• You must be sure that you can fulfill the changed payment amount. Sullivan says if your new payment is $100 a month, make sure you have enough money to pay your bills every month.
• Your issuer may require that you set up automatic payments from your bank account so that the credit card issuer knows it will be charged.
• It can be problematic to request a relief plan from one lender just to keep using other credit card issuers.

What other options are there?

If you still have concerns about your financial situation, contact a non-profit consumer credit advisory agency. These organizations can help you prioritize spending and help you determine if there are areas where you could cut costs, at least temporarily, such as gym memberships and cable TV bills.

Borrowers should also not hesitate to seek other sources of assistance, such as special unemployment benefits or other government program benefits, Opperman said. She also recommends contacting a nonprofit consumer credit counseling organization as early as possible. “Especially during a crisis, waiting too long to seek outside help only makes it harder for the consumer to cope,” says Opperman.

bottom line

Financial difficulties can happen when you least expect it. Whether it’s an accident, a sudden change in personal circumstances, or a global pandemic, if you need a break from credit card bills, reach out to your credit card issuers and ask about their assistance programs.

Keep in mind that your chances of acceptance may depend on your current status, so seek help as early as possible – don’t wait until you are behind on payments and harm your relationship with the issuer.

Susan Ladika is a freelance writer and frequent contributor to CreditCards.com.