Quick fixes for temporary repayment problem


To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs. See her website for more personal finance tips and free budgeting worksheets.
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Question Dear Sally,
I lost my job a few months ago, but I was able to continue making my monthly credit card payments until now. I have run out of funds. I am a single mom of three. I owe about $4,000 in credit card debt on seven credit cards.

My credit score is low, so I know I won’t qualify for a debt loan. I will be starting a new job in the next couple weeks, but I won’t have enough left over to make minimum payments this month.

Because my score is already low, can I just not make my payments for a while, or what other options do I have?    -- Erica


Dear Erica,
Congratulations on the new job!

I’m glad you’re not getting a debt consolidation loan in your case. I also think it’s a good thing that you’re not thinking about debt negotiation or bankruptcy. These options don’t seem cost effective or necessary for you. You don’t need options that actually cost you money or cause more damage to your credit history and score. You just need time to start getting regular paychecks again so you can pay your bills.

You have three main options now: Ask the credit card companies for a forbearance or hardship program, transfer the debts to another source of credit or just skip a payment or two and catch up when you can.

A forbearance program gives you more time to pay your credit card bill in times of financial difficulty, such as unemployment. You may receive a reprieve for six to 12 months or more. In addition, the credit card company may lower your interest rate temporarily and suspend late fees. To ask about forbearance programs, call the phone number on the back of your credit cards and tell them you have been unemployed and are having trouble paying your bills.

Another tactic that only works well in limited situations is to transfer to another source of credit. For example, once you start your new job, you could apply for a balance transfer credit card. If your credit score isn't too bad, you may qualify for one with a zero interest rate and a balance transfer deal.

You may then transfer one or more credit card balances to the new card. You have to be very careful with such a maneuver, however, as adding an eighth card could land you further in debt than you were before.

The last option, just skipping a payment, could be the most expensive, especially since you are carrying multiple cards. If you miss a credit card payment altogether, you may incur late fees. Your interest rates could go up, and your credit score may go down. The only way missing a payment on purpose may be a good idea is if you expect to be able to start paying again very soon, and you don’t want to inform each of the seven banks that you are experiencing financial difficulty. For example, say you cannot make the minimum payments on all your cards. Make as many minimum payments as you can. (Don’t spread tiny payments that are below the minimum required payment between all seven cards – you’ll only be in default on all of them.) If you miss the deadline on a card or two, don’t give up. Try to make your payments before they are 30 days overdue. By doing so, you may avoid having new, negative marks on your credit report.

You have some good things going for you. You continued making payments until now. Your balance of $4,000, while not small, should not be insurmountable. And you will soon be working and earning a steady income. With careful planning, you should be able to pay off your debts and start reaching other financial goals soon.

See related: 6 debt consolidation traps and how to avoid them

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Published: April 29, 2016

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Updated: 10-24-2016

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