Credit cards are the biggest source of debt for the vast majority of Americans and certainly the easiest to get into financial trouble with. When compounded with a crisis such as the Coronavirus pandemic, relying on credit cards can become all too common, and can make a bad situation worse. In situations like this, without enough savings, suddenly those credit card balances can skyrocket –– especially if someone loses there job or experiences a loss in income.
It’s been estimated that 60% of Americans with credit cards do not pay the balance in full every month. You might have also heard in the past that credit card debt is among the worst type of debt to have. This is true. Credit card interest rates can be as high as the mid-20s, and the balances can literally take decades to pay off if you only remit the minimum amount. If you are one of the millions of Americans with credit card debt, consider the following:
The Sooner You Start, the Better
Many credit card and personal loan companies allow 0% APR transfers that generally last for about a year. During that time, you can make interest-free payments. This can significantly lower the amount of money due monthly. To make things even better, this time, the entire amount you pay goes toward the principal. Companies are making it more difficult to get these offers, so plan ahead — don’t wait until your finances or credit score takes a hit.
Some Banks Have COVID-19 Relief Programs in Place
It is unlikely that your lender will discharge your debt or reduce the amount. However, many are willing to negotiate with you and possibly allow you to skip a payment or two while you look for a new job or otherwise get back on your feet. Lenders might also temporarily lower the interest rate, thereby making it easier for you to pay down the balance. Not all banks volunteer their relief offerings, so call, ask, and be persistent.
Be Mindful of How You Pursue Relief
Every lender is different. Appeals that are successful on one lender might not work for another. It might even come down to the specific person you speak to. However, the Consumer Financial Protection Bureau does offer step-by-step advice on how to go about requesting relief based on the pandemic:
- Explain that you have been negatively impacted by the coronavirus.
- Ask about the credit card relief packages they might have available and get all the details you can.
- Once you come to an agreement with the lender, ensure you get that agreement in writing.
Finding Errors Might Save You Money
Many people made plans before COVID-19, canceled them, and still got charged. This is especially common with hotel reservations. Remember that credit card fraud is also the most common type of identity theft. If you normally don’t look too closely at your credit card bills because they cause you anxiety, you might not notice when the bills increases. Always check the recent statements to see what you’re being charged for and dispute everything that looks suspicious.
Budgeting Can Help
If you’re already struggling to make ends meet, you might believe there is simply nothing in your budget you can trim. If you take a good look at your finances, however, there is usually something you can set aside, even if it’s only temporary. Here are some recommendations:
- Pause subscription services or ask companies if they offer any coronavirus relief.
- If you are eating out less often during the coronavirus, calculate how much you used to spend on this and set aside at least half for debt repayment and savings.
- Try to pick up extra odd jobs wherever possible to fill the gaps, such as online freelance work.
- If you lost your job, remember that even gig workers now have access to unemployment benefits.
- If you are a business owner and your company took a hit, consider applying for the various relief programs, and be tenacious with your follow-up.
Cash in Hand Is a Good Investment
It is only natural that people might feel compelled to pay off as much debt as possible. This is a great idea, but don’t forget to save money as well. The money you set aside in an emergency fund can provide a cushion for you during lean times. Think carefully about how aggressively you pay down debts versus what you keep for emergencies.
If despite your best efforts, you find you simply cannot keep up with credit card payments, all is not lost. At Financial Rescue, we help customers just like you to secure debt relief. Contact us today to find out how we can help.