How to handle credit card bills when pink slip looms
Ask a question.
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
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 website 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!
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- I paid off my card but stopped using it; will it be canceled? – Some creditors might cancel your card due to inactivity, which could affect your credit score. A simple fix? Use your card for everyday purchases ...
- Q&A: If I file bankruptcy, how will it affect my spouse? – Married and living in a community property state? Your spouse might be affected if you file bankruptcy, but you may have other debt-relief options ...
- Can 'right to offset' be applied to written-off card debt? – Banks ordinarily have the right to take funds from a customer's account to satisfy a default on another account from the same customer. The exception? credit card debt ...