Bad idea: using credit cards to pay for a move

To Her Credit columnist 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.

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Question for the expert

Dear To Her Credit,
I am in BIG trouble. I quit my job in Colorado and moved to California thinking I wouldn't have a problem finding a job. I was wrong.

One month went by and no job, so I used my credit cards to pay my bills. Two more months went by, still no job, and I was living in a hotel paying all my bills by credit cards. Now it's going on four months. I've found some part-time work, but I don't make much.

I have charged up to $14,000 on five credit cards, and my minimum payments are going up because I got some cash advances to pay bills. Can I send in less than my minimum payment to each of these cards to show I am trying and making an effort? If not, what should I do that would have the least impact on my credit? I am not behind on any credit card payments as of today. But the bigger payments start next month.   -- Nicole

Answer for the expert

Dear Nicole,
Moving from one state to another to look for work isn't a bad idea if you can afford to stick it out long enough.

Moving to a new state with no job, no emergency fund and apparently no close friends or relatives who could take you in while you got settled, however, turned out to be a bigger risk than you could afford.

Is it too late to get your old job back in Colorado? Your main problem is not credit card debt. If your credit card debt was gone tomorrow, you'd still be in trouble. As you've discovered, the big problem is lack of income.

While you're looking for a full-time job, paying less than the minimum payments on your credit cards won't protect you from the consequences of falling behind. A creditor is not required to accept payments for less than the minimum amounts unless you and the creditor have agreed upon a payment plan.

If you pay anything less than the minimum, your creditors can report your past-due debt to the credit bureaus, which will hurt your credit scores. The creditors will add late fees, and they may raise your interest rates. This quickly turns into a debt snowball that can double or triple in no time. Before long, you may reach your credit limits and start paying over-the-limit fees. If you get too far behind, your creditors can take legal action and garnish your wages.

To avoid these scenarios, you must take action immediately. Contact each creditor, tell them the situation and try to work something out with them. Be sure to get any agreements in writing, and ask them to waive late fees and other penalties as long as you make your payments. Never send a reduced amount without an explanation.  

If you can't come to an agreement with your creditors for temporarily reduced minimum payments, you may need help looking at your other options. A credit counselor can help you look at your assets, your earning potential and all your options to help you make the best decisions. I recommend finding a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

The next place you should spend your time and energy is looking for a way to make a living, either as an employee or by starting a business. Going back to Colorado may be one option. It can be harder to get a job in a strange place, where you don't know anyone and all your references are from far away. You may want to apply for jobs in California, Colorado and anyplace else you may be willing to move -- without actually moving first. It's easier to get a job when you already have even a part-time job, and it would be a shame to spend money to move anywhere right before you find your dream job someplace else.

See related: Credit card hardship programs: Little-known alternatives for debtors, 8 steps to picking a credit counselor

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Updated: 03-21-2019