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With the rise of the deadly COVID-19 pandemic, millions of Americans have lost their jobs, businesses, and income. Due to this economic instability, thousands of consumers struggled to keep up with their monthly credit card payments. This has resulted in overdue payments, penalties, and an ever-growing statement balance.
Regardless of whether you use a mileage rewards card, cashback card, secured card, or a rewards credit card, the common characteristic among all of them is that they all require a monthly payment. So, if you’re also one of the millions who are unable to pay their monthly bills during this challenging time of uncertainty, then you may be wondering what your options are.
There aren’t many solutions available, but if you work on your spending habits and manage your finances responsibly, you can find your way out successfully. In this article, we are also going to direct you towards the best strategies to deal with your situation. We will explain all that you can do in times when making minimum credit card payments is not possible for you.
Take a look at the four financial management tips that will give you the best chance of making it past this crisis without letting your credit score sustain a massive hit.
- Get in touch with your credit card company
- Consider transferring your balance with a balance transfer card
- Consider taking a personal loan for debt consolidation
- Prioritize paying off credit cards with large balances
Keep reading to understand what each of these strategies entails.
1. Get in Touch With Your Credit Card Company
Once you realize that it is not possible for you to make the minimum credit card payments, the first thing you need to do is get in touch with your credit card provider. The contact information is usually mentioned on the back of your card.
Almost all credit card companies offer a type of credit hardship program for people in difficult circumstances. Moreover, in light of the pandemic, many companies are offering special assistance and relief in the form of emergency forbearance. This allows consumers to either skip or reduce the amount of minimum payment required on the credit cards for a set period. That’s why you should contact your credit card issuer immediately, as they may waive any fees or temporarily reduce the interest rate on your bills to facilitate you.
When you get in touch with a representative, make sure that you’re honest about your situation and let them know that you’ve been affected by the pandemic. Be upfront about your inability to make minimum credit card payments. Then, you can inquire about any hardship programs offered by the credit card company and how to sign up for one.
2. Consider Transferring your Balance with a Balance Transfer Card
If you still have some sort of income coming in, then your best option may be to apply for a balance transfer card. A balance transfer card allows you to transfer your existing credit balance from single or multiple cards into a new balance card. This will save you from having to worry about multiple bills each month. Moreover, the new card is likely to have a lower interest rate on your existing balances.
Most balance transfer cards come with a 0% APR for an introductory period. This means that no interest will be added on your balances for a set term. The 0% introductory APR will allow you to pay off your balance much quicker. If you decide that a balance transfer card would be the best option for your situation, then make sure that you sign up for one with the longest introductory period of 0% APR. This will grant you the time to gain your financial stability and pay off your bills as much as possible.
3. Consider Taking a Personal Loan for Debt Consolidation
Another good option for you to pay your bills is to consolidate your credit card loans by taking out a personal loan. This method also allows you to join all your credit card balances into one debt. That way, you’ll only have to keep track of one monthly payment. By taking out a personal loan, you’ll pay off all your existing credit card debt.
Then, you’ll only have to make one monthly payment to pay off the personal loan. Moreover, personal loans usually come with a much lower interest rate and a fixed term of repayment. Credit card debts have significantly higher interest rates, often double than that of personal loans. Therefore, taking a personal loan to consolidate your credit card debt would be an excellent idea.
When looking for a lender, make sure you verify their credibility. You should also compare multiple lenders so you can choose the best possible term and APR.
4. Prioritize Paying off Credit Cards with Large Balances
Finally, one of the options to deal with the inability to pay off all your credit loans is to prioritize the cards that have the highest balances. Make the minimum credit card payments to pay off the largest bills. The biggest credit card balances have the most impact on your credit score, and if you fail to make the minimum payments on time, it can damage your credit history. That’s why it’s important to prioritize them.
However, this doesn’t imply that not making minimum payments for lower balance cards wouldn’t impact your credit score. Payment history has the biggest impact on credit scores, be it small or large balances. That’s why this method should be a last resort, and it can’t be considered a long-term solution.
When you are struggling with finances, it can start feeling hopeless to make an effort. However, there are ways that can help you out during challenging times. Always remember that credit card companies have assistance and hardship programs that you can apply for. If you follow the strategies that we mentioned above, you can get through this time successfully.