How to handle credit card bills when pink slip looms

By Todd Ossenfort

The Credit Guy

The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues. Ask a question 'The Credit Guy' archives

Dear Credit Guy,
How do I lower rising credit card interest rates when I think my job may be lost? My credit is closer to excellent than good with no late payments in the past 10 years on any credit cards. -- Brodie

Dear Brodie,
As you have found, many credit card issuers are raising interest rates. For those who are struggling to make payments now or, like you, will if they lose their jobs, rising rates could present a real problem. Credit card account charge offs are increasing at staggering rates. The good news is that even though creditors are making changes to stay profitable, many of them are still willing to work with consumers who are having trouble making payments.

A program established by creditors called "Help With My Credit" offers assistance to consumers who are struggling to make credit card payments. Consumers can call toll-free (866) 941-1030 to speak with a customer service representative from participating card issuers and receive real solutions to their problems. If your creditor is not participating or you would rather not speak with your creditor directly, you will be referred to an accredited credit counseling agency that can help. A Web site is also available. Solutions will vary by card issuer.

Before you make the call, be prepared to provide a monthly payment amount you believe you will be able to sustain you even if you lose your job. To get to your realistic payment amount, create a bare-bones budget based on your income without your current job. If you need help creating a budget, visit a credit counselor before you talk with your creditors. Your counselor will help you draft a budget accurately reflecting what you can afford to pay your creditors with your loss of income. Once you have your realistic monthly payment amount in hand, you will be prepared to evaluate the assistance programs being offered and whether they will be of any significant help to you.

Until you know your job is lost, hold off calling your creditors. Don't raise a red flag before you have to. You may still make a call to request that your rates be lowered, but the conversation will be quite different if you are calling because you are a valued customer and you want a better deal rather than if you have lost your job and can't make the minimum payments.

While you are waiting to learn the fate of your job, save as much of your income as you can. Difficult times call for difficult decisions. Most people's first reaction to a potential loss of income is to pay off as much debt as possible while their incomes are still intact. Instead, I believe it is better to accumulate as much savings as you can to ensure you have more options. It might be too late for you now, but that rainy day savings account of at least three months of expenses would relieve a little bit of stress about now and could possibly get you out from between a rock and a hard place.

Take care of your credit!

See related: Laid off, debt climbing, what now, Laid off and in debt: 5 steps to take now

Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.

The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week. Send your question to The Credit Guy.

Published: March 23, 2009

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