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Managing Credit Card Debt After a Job Loss                                                                                            

Losing your job can be daunting, especially in an economic downturn. These tips may help you manage and get some relief from credit card debt.

By Karen Lynch | American Express Credit Intel Freelance Contributor

4 Min Read | July 17, 2020 in Money

 

At-A-Glance

Managing credit card debt is one of many financial challenges you may face if you’ve lost your job.

It’s a good idea to consider all of your options – there might be some help available to you, particularly during an economic downturn, for example.

With patience and perseverance, you could delay some of that debt without any penalties.

Losing your job can present daunting challenges, especially in the midst of an economic downturn. Putting more of your day-to-day spending on your credit card may seem like a solution to cash-flow problems since it allows you to push out the date when you actually have to pay for life’s essentials. But credit card debt has to be managed carefully. Otherwise, pretty quickly, you can find yourself owing more than you bargained for in debt, interest, fees, and penalties. 

 

Here are some tips from the Consumer Financial Protection Bureau (CFPB), consumer advocates, and other financial experts, about how to manage credit card debt after a job loss.

 

Getting a Break on Credit Card Debt

Your first priority after losing a job may be to hold onto whatever cash you’ve got – not worrying about paying debts. However, instead of avoiding bills coming in, you might end up better off if you talk through your situation with the companies you owe money to. 

 

Washington has been known to encourage credit card companies, banks, landlords, and utilities to consider hardship relief for people affected by economic downturns.But it’s not usually automatic – you have to ask. Your credit card company might help with lowering your monthly payment, waiving late payment fees, or other accommodations. 

 

A survey on the early 2020 economic downturn showed that about 90% of credit card members were able to get some relief if they called their card companies to ask for it. But only 30% of card holders actually called.2

 

Contacting Your Card Company

Here are a few things to keep in mind when contacting your card company:

  • Companies are handling high call volumes, so it might take a while to get through on the phone.
  • The company’s website might be a be a good first stop for information that can speed the process. If you have an account, you may be able to get online chat assistance after logging in.
  • Make sure to get a copy of any agreements and program terms by email to help if questions come up later.
  • Calling early, and staying on top of your debt, may be key. It could be harder to get relief if you ask after you’ve already fallen behind.3
  • There are no guarantees; credit card financial relief is usually decided by your card company on a case-by-case basis.
  • The financial relief is only temporary – in some cases for a few months4 – and you should be planning ahead. 

The CFPB suggests you have the following information on hand before you call your credit card company:

  • Your financial and employment situation.
  • How much you can afford to pay.
  • When you might be able to restart regular payments.
  • Other details about your income, expenses, and assets.5

 

 

Credit Card Management Tips

It’s also a good idea to stay on top of other basic credit card management details such as:

  • Your credit limit: Card companies’ policies may be in flux, and changes to your limit could have short- or long-term impacts as you try to get back on your feet.
  • Cash advance expense: A cash advance on your credit card could seem like a lifeline after a job loss. But cash advances must be weighed carefully due to their transaction fees and generally higher interest rates.

 

Saving on Credit Card Refunds and Purchases

You might be able to conserve a little cash by combing through your credit card statement itself. Here are some examples:

  • Membership services: Say that your gym, for example, has temporarily closed. You could be able to stop the automatic monthly payments. Before taking such a step, contacting the gym – if it hasn’t already contacted you – can avoid problems down the road.6
  • Card member benefits: Some card companies may offer special benefits for card holders during the economic downturn, such as discounts in product categories including home essentials and wellness.

 

The Takeaway

Losing your job during an economic downturn raises many questions about your current and future finances. Your credit card company could help answer at least some of the challenges you face and may help provide some temporary relief from credit card debt. Additionally, credit counselors are available through the CFPB website and elsewhere to help with these and other questions.7

Megan Doyle

Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

The material made available for you on this website, Credit Intel, is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.