How Credit Card Hardship Programs Work

One of the most challenging aspects of managing personal finances is gauging the future. We plan the best we can, but unexpected events can still affect our lives at any time.

The COVID-19 pandemic is a perfect example, as it rapidly affected the employment status, income flow, health and spending patterns of millions of Americans. The economic impact of coronavirus has been so widespread in the U.S. that many credit card companies introduced specific policies meant to help cardholders stay afloat during the most tumultuous months. These pandemic relief measures included measures like suspending payments for a certain amount of time, waiving fees, raising credit limits and more.

This illustrates a specific instance of credit card hardship programs in action. Here’s more about how cardholders may be able to get relief from their credit card bills by asking for hardship considerations.

Credit Card Hardship Programs: The Basics

Sometimes financial catastrophes leave borrowers unable to make payments on their balances. But, the bills keep rolling in nonetheless. One option, rather than falling behind on what you owe and risking damage to your credit score, is proactively reaching out to credit card companies. Many companies have hardship programs designed to provide some measure of relief to customers if they do need help.

U.S. News & World Report provides three examples of circumstances that may qualify cardholders for relief measures:

  • Job loss
  • Divorce or separation 
  • Serious illness or injury resulting in medical bills and/or time off work

Think of hardship programs as temporary measures meant to give the borrower some time to get back on their feet after a financial blow.

How to Enter a Credit Card Hardship Program

Remember, creditors will not reach out to you regarding hardship measures — it’s your responsibility to reach out to them. You’ll need to provide an honest explanation of the financial difficulties you’re facing, as well as their tangible impact on your budget.

Creditors and banks are typically more willing to work with borrowers who have established a history of making on-time payments leading up to the hardship. Similarly, entering a hardship program requires proof of said hardship — getting overwhelmed by bills due to habitual overspending will not qualify in the eyes of lenders.

Hardship programs are also not always set in stone; there may be some degree of negotiation required to establish realistic new terms moving forward. Avoid saying yes to the first measure of relief companies offer, because missing even a single payment can prompt issuers to end the relief terms.

If your credit card company is unable to offer you enough hardship relief, it’s worth exploring more heavy-duty solutions. Look into debt management programs, credit card consolidation opportunities and debt settlement to learn about other potential options.

Possible Tradeoffs Under Credit Card Hardship Programs

Credit card hardship measures can provide temporary relief, but oftentimes borrowers will still be responsible for all the interest that accrued — meaning they may end up paying more in the end due to these compounding interest charges.

You may be required to stop using credit for the duration of your hardship plan, or close the account altogether. These measures can impact your credit rating.

Whether or not you’re a good fit for a credit card hardship program depends on a few factors: your budget, your financial circumstances and your payment history. If temporary relief in the form of lowered interest, lowered minimum payment or reduced penalties could help tide you over until you’re able to take the reins on paying your bills again, it’s an option worth exploring.

Blake Cohen