For people who cannot make their credit card payments, credit card debt can quickly pile up, resulting in long-term financial difficulties, and they might be wondering if it’s possible to delay credit card payments.
Fortunately, there may be options depending on a person’s financial situation.
Credit Card Relief Options
Some credit card companies are providing financial relief programs to their customers in response to financial hardships related to COVID-19. The cardholder can get information about these programs by asking the credit card company about their offerings.
Because of the increase in the volume of information requests, some credit card companies may request cardholders to visit their website for details on each program.
Although programs may vary by company, here are some of the relief programs that credit card companies may offer.
Decreasing or Deferring Payments
Many credit card companies allow cardholders to reduce or delay credit card payments for a specific amount of time by offering emergency forbearance. Once the forbearance period ends, cardholders will need to make up any skipped or postponed payments.
While the credit card company may not require cardholders to make up payments right away, they will need to begin to make at least the minimum monthly payment. Depending on the new credit card balance, the minimum payment required may have changed.
Refunding or Waiving Late Payment Fees
Usually, when a cardholder misses a credit card payment, they are charged a late fee. Due to the pandemic, many card companies are refunding or waiving late fees if the customer requests so due to financial hardship.
Lowering the Interest Rate
Some credit card companies may reduce the interest rate on an account during the pandemic. However, this rate may increase after the specified term ends.
Establishing Payment Plans
Some credit card companies help cardholders repay their credit card balance by offering payment plan options. Cardholders may be able to secure a better repayment plan that works for their current financial situation.
Keep in mind, all of these options may vary by creditor.
Consequences of Missing a Credit Card Payment
Increase to the Credit Card Balance
Making a late payment may increase a credit card holder’s balance in several ways. First, credit card companies can charge a late fee of up to $28, even for the first occurrence. If a cardholder misses a payment after that, the late fee could increase to $39. It’s important to note that this fee may not exceed the minimum balance due.
Another way the credit card company may increase the balance is to increase the account’s interest rate. For example, if the cardholder hasn’t made a payment for 60 days, the credit card company may increase the APR to a penalty APR.
Increasing the interest rate can also increase the revolving balance on the credit card. However, not all creditors may charge penalty interest.
Credit Scores May Be Impacted
Since payment history and account standing are some of the factors used to determine a cardholder’s credit score, making late payments may negatively impact it. But the amount of time a cardholder’s credit is affected can vary depending on the situation.
In general, creditors send the payment information to credit bureaus. They use codes to identify the standing of the accounts. But since there is no code for a payment that is 29 days late, they may use a credit code to show the card is current. After the payment passes the 30-day threshold, however, the creditor may use the late code instead.
Using the late code is considered a delinquent payment to the credit bureaus.
It’s important to note that different creditors may use different codes at different times. So it’s hard to determine when a credit score may be affected by a late payment.
While missing a payment may not impact a score initially, it may appear on a cardholder’s score and stay there for several years if it’s a continued occurrence. Of course, this depends on the situation and the other factors credit bureaus use to figure the credit score.
The Balanced Could Be Charged Off
Another consequence of making a late payment is that the creditor may not allow the cardholder to use it for other purchases until the card is in good standing.
Additionally, if the payment is 180 days late, the creditor may close the account and charge off the balance. If a creditor charges off the balance, it means that the creditor permanently closes the account and writes it off as a loss. However, the cardholder will still owe the outstanding balance remaining on the account.
In some cases, creditors will attempt to recover this debt by using their collections department. In other cases, they may sell the debt to a third-party collection agency that will try to get payments from the cardholder.
Creditors have some flexibility when it comes to working with their customers. For customers who have had financial setbacks such as losing a job, creditors may help them get back on track under FDIC regulations. Usually, this type of flexibility is available for consumers who show a willingness and ability to repay their debt.
Alternative Options
For consumers who find themselves struggling to make their credit card payments and don’t have creditor relief programs available, there are a few other options to consider that may reduce the financial burden of making credit card payments on time.
Balance Transfer Credit Cards
A balance transfer credit card is a credit card that offers a lower interest rate, or even a 0% introductory interest rate. This could allow a consumer to transfer a high-interest credit card debt to a card with lower interest and potentially pay off the debt faster. Usually, balance transfer credit cards have introductory periods that last anywhere between six and 21 months.
Using this method can potentially be a money saver if the consumer no longer uses the high-interest rate credit card and continues to pay down the transferred debt at the lower interest rate.
In general, consumers need a solid credit history to qualify for a balance transfer credit card. If approved, consumers can use the new credit card to pay down high-interest debt. Therefore, this can be a solution for credit card debt repayment, as long as the cardholder can pay off the debt before the introductory period ends.
However, if the balance isn’t repaid before the introductory period ends, the interest rate typically jumps up. At this point, the balance will begin to accrue interest charges, and the balance will grow.
Home Equity Loans
With fixed-rate home equity loans, some homeowners may qualify for a lower interest rate using their home as collateral rather than using an unsecured loan (a loan that’s not backed by collateral). Like other types of home equity lines of credit, the terms and interest rate a borrower might qualify for is based on a variety of financial factors.
It’s important to note that borrowing against a home doesn’t come without risks, such as leaving the homeowners vulnerable to foreclosure if they don’t pay back the loan.
Credit Card Consolidation
For borrowers who may not want to use their home as collateral, but are struggling to pay down debt, debt consolidation with a personal loan may be a better fit for their situation. Essentially, borrowers use a personal loan with better terms and a lower interest rate to pay off credit card debt.
Using a personal loan to consolidate credit card debt can make monthly payments more manageable and potentially lower payments. Although a credit card consolidation loan won’t magically make debt disappear, getting the debt paid off might make a difference in a person’s overall financial outlook.
Recommended: What is Credit Card Consolidation?
The Takeaway
Whether your credit card company offers debt relief programs you qualify for, or you want to explore alternative options for getting out of debt for good, taking steps toward debt repayment may give you peace of mind.
A credit card consolidation loan might be worth considering if you have been making on-time payments on more than one credit card debt and meet the lender’s income and credit score criteria. While credit card debt consolidation is only one solution for accelerating debt repayment, this solution may be what you need to eliminate your debt for good.
With a SoFi credit card consolidation loan, you can check rates and terms you may qualify for without affecting your credit score. And, SoFi loans come with no origination, prepayment, or late fees that can increase the cost to borrow funds.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
SOPL20011
