Credit card debt is rising.
American credit card balances increased 13% from 2021 to 2022, or $100 billion — the biggest percentage increase in more than 20 years, according to the Federal Reserve Bank of New York.
Combine high interest rates with a hardship like a job loss, natural disaster or extended illness, and you could spiral into credit card debt in no time.
A hardship program could help.
Many credit card issuers will work with you to create a payment plan, offer a payment extension or temporarily reduce your interest rate.
Never heard of such a program? That’s not a surprise — credit card companies don’t typically advertise that you can adjust your payment plan or even stop paying your bill for a while.
But before you call up your credit card issuer, you should know that while it can help, enrolling in a hardship program can also do more harm than good if you don’t understand the terms of your arrangement.
Here’s how it works.
What Is a Credit Card Hardship Program?
A hardship program is a payment plan for your credit card. You usually negotiate terms with your card’s issuing bank, which may waive fees, grant a temporary payment pause or lower your interest rate for a certain time.
Banks may also offer hardship plans for student loans, mortgages, personal loans and other financial products.
Hardship programs vary depending on the issuer and even within the credit card company or bank itself. Some credit card issuers don’t offer hardship programs at all.
How Do Credit Card Hardship Programs Work?
The best time to use a credit card hardship program is when you are facing temporary financial difficulties with a definite end in sight.
Here are some examples of a financial hardship that might qualify you:
- Pay cut
- Job loss
- A serious illness
- A death in the family
- A natural disaster
“If you’re unable to make the payments, going into a credit hardship program or a payment plan could be a better solution than…