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Credit Card Hardship Program? Here’s if You Should Do It

February 11, 2021

If you are going through a temporary financial rough patch, say you’ve lost your job or had a serious accident, it can get difficult to meet your debt obligations.

In such a situation, it may be worthwhile for you to talk to your credit card issuer and find out whether they offer any hardship programs.

What is a credit card hardship program?

With a credit card hardship program, you interact with your credit card issuer and try to work out a unique payment plan to help you tide over the hard times.

Depending on the financial institution you are negotiating with, the type of hardship you are facing, and the deal offered by the issuer, you can usually expect a combination of the following benefits:

  • Lower interest rate, fees, or penalties

  • A smaller minimum payment

  • A fixed payment schedule

Some of the situations that may qualify for a hardship program include a pay cut, unemployment, a family emergency or divorce, a serious illness or accident, or a natural disaster.

What do you need to do to get into a hardship program?

Hardship programs are not offered by all issuers, neither are they advertised.

However, if you need help with debt due to certain circumstances, you can approach the institution to find out if they can offer any sort of assistance.

1. Work out a new budget

The first thing you must do before approaching the issuer is to work out a new budget that would help you cope with the setback.

Let’s say you’ve had to undergo a pay cut recently; in that case, in light of your new income, figure out how you are going to reduce your expenses to accommodate the situation.

The benefit of doing this is that it may help you negotiate a better deal with the issuer, and even if the company is unable to offer assistance, at least you would have taken a positive step towards handling your finances.

2. Contact your issuer

Call the number at the back of the card to speak to the representative and explain your situation and find out if they have a hardship program.

You may have to wait as your call is transferred to another department or representative, but remember to be patient and polite.

Once you’ve been connected with the right person, provide the details of your problem – if you’ve been in good standing with the issuer so far, and if they have a hardship program in place, they may be willing to help.

3. Review the terms carefully

You must carefully go over the terms and conditions that are being offered and accept them only if you can honor them.

For example, if the issuer is offering you a lowered minimum payment, then make sure the new amount is something you can afford to pay.

If you fail to make this payment, you may find that the entire deal has been canceled.

If the arrangement offered is not likely to work for you, consider continuing to negotiate.

Understand that you are in no way obligated to accept the hardship program offered by the issuer if the terms do not suit you.

Drawbacks of entering into a hardship program

A hardship program can make it easier for you to manage your debt; however, it does have certain downsides.

For starters, your creditors may place a note on your credit reports regarding the program, and this may make other lenders wary about extending credit to you.

Secondly, the issuer may lower your credit limit, or freeze or even close your account.

As the amount of credit available to you is reduced, your credit utilization ratio, and in turn your credit score, may deteriorate.

Moreover, the availability of the hardship program itself may be dependent on certain factors, like proving your hardship through documentation, meeting with a credit counselor, or sanctioning automatic withdrawals from your account.

It is only when you clear these requirements that you can expect to receive help through this program.

At times, it can be a difficult task to swallow your pride and request help in the form of hardship programs; however, given the circumstances that you may be facing, it is an option that should be taken into consideration.

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