One Cent At A Time

A Personal finance blog for saving money and earning more and thus having a better life

Your Credit Cards And Their Hardship Programs

34 Comments

Welcome to One Cent at a Time. Let’s start with a true story I read in an online forum recently.

Steve recently lost his job at a sporting goods manufacturing company, he has 3 credit cards each with high balances. He now lives on emergency fund (What exactly is an emergency fund)and a little help from his wife’s income as a play school teacher. They have two children of 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

  1. Declare bankruptcy – In order for him to continue to look for decent jobs, he can’t do that
  2. Settle his debt – Since he lives on emergency fund, he doesn’t have the money needed to settle his accounts
  3. A little side business to continue to pay minimum due amount – This will hamper with his preparation for job interviews. A side business that earn $500 per month is not an easy task.
  4. Talk to a credit counselor – Getting help from 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 else where, try looking in to the card companies itself for help.

Today all major credit card companies offer a way out of this situation for their card members, they take care of you, even if you don’t think so. As a card member 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 drive for customer satisfaction has driven almost all of them to offer a hardship program for their customers. It all started during 2008 recession and still continuing.

These benefit programs has 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 same.
  • Your monthly interest rate (APR) gets reduced, you enjoy up to 0% APR for certain number of months.
  • You get to keep the card, many companies cancel the card after enrollment, but re instate once you graduate from the program.

Card Issuer’s Benefits From Hardship Program

  • Number of non paying 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 card member 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 cancelled, as soon as you enroll in them.

Note> Remember very few banks and credit card companies offer it on their websites, you have to specifically call them (help desk) and ask for a ‘hardship’ program, as this is the term in industry. You might have to speak to a number of representatives, before you actually get enrolled, so have patience.

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 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 come to an agreement to pay certain amount every month till the term of the offer is in effect, these offers ranges from 6 months to 5 years (Long term hardship). Some companies need you to enroll for automatic debit from 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 in to it. Its essential that you 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 differs 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 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 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 leader 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 hardship program. He took care of his hardship, can you?

Do write in comments on your own personal experience with card companies, good or bad, it will help other readers.

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Comments

  1. That is interesting. I was not aware of the hardship programs offered by credit card companies. I was only aware of mortgage companies that did so. That is useful information.

    Reply

    • Thanks Mark,
      Problem is, these companies do not advertise the program and there is no way you can find a link on net. All you can do is calling help desk. There are regular submission to fed from these issuers on the yearly enrolment and the revenue numbers. It is not mandated but they generally do it as part of showing off the good practices.

      Here is the link for more information

      Reply

  2. I used a hardship program about 10 years ago, and they really messed things up! They gave me an agreement for a year, setup automatic transfers out of my bank account for that year, but the person only entered it as a 6 month agreement. So, in the middle of the program, they raised my rates and hit me with all types of fees! When I called, the said that they had to go by what was in the system – even though it was clear from my automatic payment plan that the agreement was really for a year!

    By the way, it was Discover that did it to me! I haven’t forgiven them yet, even though it was over 10 years ago. Now that I have good credit, they keep sending me messages to come back!

    Reply

    • Any card issuer work with 1 -2% error rate. They can rectify almost 75% of the errors with manual intervention. You had a bad luck to have fallen in to hopeless 25%. But Discover offering a hardship program 10 years ago was a news.
      If you don’t pay to keep up your softwares, or don’t fund projects properly, there will be bugs in code and people will continue to suffer because of that.

      Reply

  3. Credit cards sure can suck the life out of you! My suggestion has always been to pay off all of your debts as soon as you can. Even with the low interest rates today, I still stand by my statement. It’s a guarantee that you won’t have to pay the interest, it will free up your cashflow once you’ve paid off the debt, and after the debt is gone, you’ll be able to invest heavily in your future! 🙂 It sure is nice.

    Reply

    • Absolutely agree, and recommend that you set up auto payment out of your bank account every month on your due date. you get to keep points or miles and don’t have to pay a cent on interest.

      Reply

  4. Interesting article. I had no clue about hardship plans. Good to know in case I ever run into an emergency. Do you work in the credit card industry? Thanks for shedding light on this option!

    Reply

  5. Really good information here that so many don’t know about! My cc helped me like this but I also went in combination with a debt management plan in the end.

    Reply

  7. Glad I came across your blog through the Yakezie challenge. I might be finding myself in need of help in a month or so since my job has been cut in half. Thanks for letting us know about this.

    Reply

  8. American Express hardship program lowered my credit score. They reported I was 60 days late to credit score companies and lowered my almost 700 credit score in the late 500 range..I have been a member of AMEX since 2008 and never missed a payment..they just lost a great customer.

    BEWARE THEY WILL MESS UP YOUR CREDIT SCORE!

    Reply

    • Why don’t you call them and ask them to take action? I believe you were paying as per the program amount. There are occasional software glitches and you may have been one unlucky. Mind letting us know what happened actually?

      Reply

      • They state it in the disclosure they read you at enrollment. There are certain companies that will ruin your credit by enrolling in a hardship program, IMO, showing delinquency on your credit report SHOULD be less damaging than filing bankruptcy, but given that many of these programs are 5 year pay-off terms, and bankruptcy is stricken off your record after 7, it’s up to you to figure out financially what works best for your situation. Most of the banks will kick you off the program and raise your APR back to the original rate or even worse a penalty rate for missing a payment while on the program. While most banks do report the closure of the accounts as voluntary on your behalf, it is best to make sure of that by calling in and closing the account on your own first, before enrolling, just to be sure. As of this moment Capital One is not offering any hardship programs that I have been able to find for my clients, and if anyone does find something, I’d appreciate the details.

        Reply

  9. I enrolled in the Chase hardship program and it also lowered my credit score. I was in the lower 700’s now it is below 600. They reported me late twice even though I was on an automatic debit plan while in the hardship program. I am writing to Chase to have this situation fixed. If they don’t fix it, I will not be returning as a customer for any of their products. I was only in hardship do to being unemployed after college. I make good money now, they will regret not getting my business.

    Reply

    • KJ , its your right to fix anything wrong on your credit records. if you have a online/offline records of the plan agreement and bank statement that you paid on time every month, or was deducted by Chase every month. I would suggest you taking up action against them. A 100 point loss is too much for you compared to the Chase loss if you turn away in future.

      Reply

  15. I would recommend going to Consumer Credit Counseling over hardship programs I went through one over 10 yrs. ago and after program completion, my credit score actually improved. The nonprofit s charge a nominal monthly handling fee but is probably cheaper then a bank. The major downside is all accounts are closed and you can not access credit. The plus is that they have been around since the 1950-1960,s and the credit card companies,work with them, …K
    ,

    Reply

    • thanks for the advice. Not sure about the non profit status of the org you mentioned. A quick check on Google brought me a lot of confusing names and not sure which one of these is non profit. Did you try hardship programs at all?

      Reply

  16. My husband has been on a hardship program with Chase for three years now, he has two years left to pay. The problem is, he now is sick and was diagnosed with Parkinson’s two years ago. We are financially drained from medical and other bills. He is 78 years old. What can we expect if he goes off this program? Thank you for any information you can give.

    Reply

    • I am not sure about Chase’s hardship structure. But most likely your account will be closed. You’ll get hit on your credit. But at this age, I don’t think you’ll have any more loan to take up. So the adverse credit impact should be inconsequential to you.

      But be prepared for some collection phone calls. Good news, you’re protected by federal law, excessive verbal force can be reported to authority as they’ll count at harassments. If you have at least some money to pay off then go for settling your account. Negotiate for 40%-50% of total balance due as the settlement amount, not more than that.

      But if you have the money then you should pay off entire due.

      Reply

      • Thank you so much for the reply.The account has been closed for the three years that my husband has made the payments…he still has two years left and can’t pay the $247.00 any longer. His medical bills has put a big hurt on us. If this is turned over for collection can his pension check and social security checks be tied up? I have bee researching this and the info says pension or s/s checks can’t be touched. Do you know if this is correct? Thank you.

        Reply

          • Thank you so very much for answering my question, that’s what I was thinking but I wasn’t sure. Now, we have to figure out what my husband is gonna do. Have a great day!

  17. I have signed up with discover for a hardship program. My problem is that I have several other cards, and I am injured and I cannot work. What of I need to apply for bankruptcy after all in a couple of months? I am doing my best but I may not be able to handle of the payments.

    Reply

    • I would think the attorneys would just reach out to the cc companies as normal if you still need to file bankruptcy in time.

      Can I ask how Discover’s program was? I’m looking at reaching out to them but wanted to get an idea of what they offered. Thanks!

      Reply

  18. I have become disabled and not able to return to work. I am now on ss disability, i am 61 and weigh 87lbs. I have called discover every week for 6 weeks now and they will not work with me. I bave asked for lower pymts, now my savings is gone. My credit core is 799 with them interest 15.9, they will lower it to 9.9 but pymts stay the same. Am i better off not paying at all then they work w you? This is hard and im very sad.

    Reply

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