Steve recently lost his job at a sporting goods manufacturing company, he has 3 credit cards each with high balances. He now lives on the emergency fund (What exactly is an emergency fund)and a little help from his wife’s income as a playschool teacher. They have two children age 10 and 6.
Because of a combined debt of $25K he has to pay $500 per month to keep his credit card active and credit score in-tact. But, he obviously can’t afford to make that payment every month. He has the below options in front of him
- Declare bankruptcy – For him to continue to look for decent jobs, he can’t do that
- Settle his debt – Since he lives on an emergency fund, he doesn’t have the money needed to settle his accounts
- A little side business to continue to pay minimum due amount – This will hamper with his preparation for job interviews. A side business that earns $500 per month is not an easy task.
- Talk to a credit counselor – Getting help from a credit counselor, surely this is one of the best ways to deal with the situation, read more about Credit Counselling.
But it is not the best option available for you, a simple effort can bail you out of the situation, your card issuer deals with cases like Steve’s 1000 times a day. Instead of looking help elsewhere, try looking into the card companies itself for help.
Today all major credit card companies offer a way out of this situation for their cardmembers, they take care of you, even if you don’t think so. As a cardmember you are a valued customer, you are earning money and profit for them. It is in credit card companies’ best interest to protect you from financial trouble so that you get over and start spending again quickly.
It is still not a mandate for the banks and card companies to offer such program, but the intense competition and drives for customer satisfaction has driven almost all of them to offer a hardship program for their customers. It all started during the 2008 recession and continuing.
These benefit programs have advantages for you and your issuing company, both. Remember always that it is you who is responsible for your debt, not the card issuers.
Your Benefits From Hardship Program
- Your minimum due payment gets reduced from what it is at present, if you are required to pay 5% of your total balance per month now, you might have to pay only 1% going forward if you enroll.
- Your fees and penalties are waived, resulting in a lot of savings.
- Companies do not report negatively to credit bureaus, your credit score stays the same.
- Your monthly interest rate (APR) gets reduced, you enjoy up to 0% APR for a certain number of months.
- You get to keep the card, many companies cancel the card after enrollment but reinstate once you graduate from the program.
Card Issuer’s Benefits From Hardship Program
- The number of nonpaying card members gets reduced. When your monthly payments get reduced, you start paying, this increases their receivables, resulting in less loss provision and improved bottom line.
What Is A hardship program
A hardship program is a little known payment plan your credit card company has, almost all of ’em, which they do not advertise, to prevent people from taking undue advantage of it and thus, abuse the program.
When a cardmember is in hardship (short-term or long-term), you can enroll in the program and get the benefit I described above.
In almost all the hardship program offering, your card will be closed or canceled, as soon as you enroll in them.
Your monthly APR will be reduced to zero or near-zero, depending on the type of card you have. Almost all of ’em are offering 0% APR for the first few months.
Your accumulated fees and penalties will all be waived, and you will get an assurance that negative credit bureau reporting will not take place.
You have to agree to pay a certain amount every month until the term of the offer is in effect, these offers range from 6 months to 5 years (Long term hardship). Some companies need you to enroll for automatic debit from the bank account.
If you are in trouble with paying credit card bills temporarily, want a respite and hope that your finance will be in order in next few months, do not hesitate to call up your card issuer and ask about the program. Ask them to have you placed in their hardship program.
Do not abuse the system, the people who handle such cases are generally highly trained and you may or may not be accepted into it. You must present your case accurately and entirely.
Chase, Citibank, HSBC, Capital One, Bank of America, Wells Fargo, American Express, and Discover all offer hardship programs.
The term of the plan, APR rate and mode of payment differ between them. Your monthly payment is not just a random number, its carefully calculated to a certain value where both you and your issuer are in win-win situation.
One hidden aspect of this is, your card is closed either permanently, or till the duration of the payment plan, which leads you staying well within your need without falling in to further debt, while protecting the issuer from further damage from you.
|Even if you get advice from experts to go for debt management plan or Credit Counselling, give it a try by calling up.
While calling them to keep in mind that not every customer care representative are aware of the program, a bank has thousands of call center employees working for credit cards department and the only handful of them are trained to negotiate this offer, always utter four terms to indicate what you are looking for..“hardship” , “Assistance” and “Relief” and “Special Program”.
Also try to speak to their manager or supervisor if you can’t get an answer from the first person you spoke with, if that doesn’t help, try calling them again.
Back to the story, Steve now pays only $210 per month towards credit card debt, while looking for a new job. He is also coaching for a local club for side income.
He did enroll all 3 cards into a hardship program. He took care of his hardship, can you?
Do write in comments on your personal experience with card companies, good or bad, it will help other readers.