What Does a Credit Card Hardship Program Entail?

While the prospect of letting your credit card issuers know you’re struggling with money might seem like a situation you’d like to avoid at all costs, there are certain instances in which it’s more beneficial to be honest than to keep your troubles hidden — and risk falling behind on payments altogether.

Believe it or not, sometimes lenders are pretty accommodating when borrowers are having problems. But you will have to have a frank conversation with your creditors to qualify for any sort of hardship program. Otherwise, the bills will keep coming, the interest will keep accumulating and your credit score will keep taking hits.

Credit Card Hardship Programs: What to Expect

While creditors don’t unanimously offer hardship provisions to cardholders, many do. And, if you’ve never heard of them before, don’t feel bad — money lenders tend to avoid informing the world they’re willing to work closely with borrowers.

With that said, your issuing bank may agree to cut you some slack — typically in the form of lowering or freezing interest rates, eliminating fees or reducing minimum payments due — if you have a legitimate need for such concessions.

As NerdWallet outlines, some of the hardships that may affect your financial situation enough to warrant help include:

• Income reduction
• Layoffs
• Natural disaster
• Medical emergency
• Family emergency
• Divorce

Be prepared to succinctly and honestly lay out your reasoning for needing hardship assistance. Avoid exaggerating or lying — especially if your bank will be able to see that your credit card debt is a result of frivolous spending rather than misfortune. You should also be prepared to back up your claims with documentation as needed.

Also keep in mind credit card hardship programs are temporary in nature; they’re a way to help customers who have fallen on hard times get back on their feet again, rather than a permanent fix.

Whether or not a cardholder agrees to work with you will also depend on your track record as a borrower. If your history is riddled with late payments, there may be some hesitation. If you’ve been a responsible cardholder for years and are experiencing difficulty making payments for the first time in years, creditors are likely to be more amenable to stepping in.

Downsides to Credit Card Hardship Plans

Of course, as with any and all debt management options, there are pros and cons to carefully consider.

Your bank will probably suspend or close your account so you’re unable to rack up more charges while undergoing assistance. This, in turn, will affect your credit utilization ratio — or the measure of how much of your total credit you’re actually using. Taking one or more accounts out of play raises your utilization ratio as well as lowering the average age of your accounts. Both of these actions can negatively affect your credit score.

It’s Worth Talking to a Credit Counselor

It’s best to spring into action the minute you realize your credit card situation will be going south. However, talking to your creditors doesn’t have to be your first step. Consulting a certified credit counselor to go over your budget and debts in detail is usually a helpful first step, especially when your financial situation changes suddenly as a result of a hardship.

A credit card hardship program entails speaking with your creditors and working out a temporary plan to help you get back on your feet financially following a change in your financial situation. It’s a debt management option worth exploring if you’re about to fall behind on bills — and the sooner you open up the lines of communication, the better your chances will be.