Can you skip a credit card payment during temporary loss of income?
Issuers are more likely to offer temporary payment reduction rather than skip
Fred O. Williams is senior reporter for CreditCards.com. A business journalist since 1987, his work has appeared in Kiplinger's Personal Finance magazine, the Buffalo News and USA Today.
Can I skip a payment or two when there's a temporary loss of income?
Card issuers are more likely to offer a temporary reduction in payments than an outright skip, but some will allow it under the right circumstances.
- Different issuers have different policies. Discover, Capital One and most credit unions have reputations for being relatively flexible, while Bank of America is regarded as a stickler for the rules.
- Approval is more likely if your payment history is good – and if you can show that your temporary loss of income is really only temporary.
- Interest will keep building up on your balance, but the skipped payment won't be reported to credit bureaus as a missed payment – which would sharply reduce your credit score.
This question started out as a query about suspending credit card bills while serving a one-year sentence in prison.
Unfortunately, no card issuer will suspend payments for that long a period. Long-overdue bills are just one of the financial hardships that people leaving jail must face after paying their debt to society.
See “How to prepare financially for time in prison” to learn further advice – such as appointing a trusted person as power-of-attorney to help with finances while in prison.
See related: 5 steps to rebuild credit after prison
Payment options during extraordinary circumstances
For a less severe financial crunch, it may be possible to suspend payments for a month, maybe two months at the outside, credit counselors said. Counselors at nonprofit credit counseling agencies often negotiate with card issuers for hardship programs on behalf of debtors.
“They [card companies] all deal with it differently,” said Claudia Fehribach, a manager and credit counselor at Debthelper.com, a credit counseling agency based in West Palm Beach, Florida.
Your payment history will be a critical factor in the decision, she said. “Is the guy consistently a good payer, or is he a guy who, every six months, something happens,” Fehribach said.
In a bona fide natural disaster, such as Hurricane Maria's devastation of Puerto Rico and the U.S. Virgin Islands in 2017, local banks have been known to allow missed payments. But when the misfortune only affects your household, banks are less understanding.
“If you're in a serious situation, a lot of lenders would like to help a good customer,” said Martin Lynch, director of education at Cambridge Credit Counseling in Agawam, Massachusetts. However, “most hardship programs aren't built around skipping a payment altogether.”
This is partly because bank regulators frown on skipped payments.
The examiner's manual published by the Office of the Comptroller of the Currency says, “When banks require customers to make monthly payments, the banks are able to monitor portfolio quality through more accurate delinquency reporting.”
The OCC even discourages prepayment of a card balance, because it interrupts the monthly payment schedule.
Credit reporting requirements are another obstacle to skipping a payment. As furnishers of credit information, banks are under legal obligations to report accurate data.
“We have heard anecdotal information that some lenders might opt to give delinquent borrowers a grace period,” said Ethan Dornhelm, vice president of scores and predictive analytics at FICO, in an email interview. For example, a bank might wait 60 days before reporting the 30-day delinquency in the previous month – in effect, a skipped payment. However, he said, such treatment is not guaranteed.
Reduce, rather than skip, a payment might be an option
For this reason, it is easier to negotiate a reduced payment than a skip. It may be possible to temporarily cut the payment by 50 percent or more, credit counselors said. Some banks might also waive interest payments for a period.
- To improve the odds of getting a deal, document the temporary nature of the loss of income.
- A job offer letter from a new employer, a notice of a pay raise, an insurer's confirmation of a claim, or a statement of pending government benefits are examples of the documentation card issuers want to see.
Not surprisingly, lenders aren't eager to talk about the terms they might offer customers who face a financial crunch. Questions submitted to major card banks met with silence.
Some banks do have a skip-a-payment option in their terms and conditions. However, these programs are not designed to help you out of a jam. On the contrary, the skip programs are a profit-making tool for the lender.
This language, from BBVA Compass card agreements, is common:
“We will tell you when you can skip a payment,” the terms sheet says, making it unsuitable for dealing with a financial emergency. Furthermore, “if you skip a payment, you will owe the skip payment fee and interest for the skipped billing cycle, you will lose any grace period that otherwise would apply, and you must pay the regular minimum payment due for the next billing cycle.”
Tip: If you're considering a debt management plan, there are things you should know, including how these consolidation options may be perceived by lenders and that you can't use your credit card until you're done with the plan. See "9 things you must know about debt management plans" to learn more.
Credit unions be more helpful
Credit unions have been known to allow skipped payments in cases where banks would not, said Maureen Keown, vice president for marketing and community engagement at Clarifi, a Philadelphia-based credit counseling agency.
In addition to facing a different regulatory structure than banks, credit unions often have a claim on funds deposited in your checking and savings accounts.
This claim, called a security interest, gives the credit union a greater assurance of being able to collect the balance on the card if your finances get worse instead of better.
Does having a deposit account with the card-issuing bank improve the chances of being allowed to skip a payment? Not necessarily, Fehribach said.
Many Bank of America customers have deposit accounts with the bank as well as a credit card, but the lender has a reputation of being relatively inflexible with hardship arrangements, she said.
Bank of America didn't reply to a request for comment about hardship policies.
What to do if you need to skip a card payment
If your request to skip a payment is turned down, it probably means the bank thinks your financial problems are more serious than you do.
If you're only able to make minimum payments, they may be right.
“You should take assessment – how big is the debt?” Fehribach said. “If you're in a situation where you've only been paying the minimum for a few months, chances are you already can't afford it.”
People resist entering a long-term repayment arrangement, formally known as a debt management plan, because it requires closing accounts for new purchases.
Painful as that is, it may be the critical step toward returning to financial health.
“If you need payment relief, it may be time to pull out the budget again and talk to a credit counselor,” Lynch said.
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