Dear Credit Card Adviser,
Like many Americans, I have just recently been laid off from my job. I was employed with the same company for nine years and have a credit score in the 740s. Is there any way for me to have the credit card company help me through this difficult period by reducing or eliminating the interest portion of my payments? They have, in fact, done the opposite during the past two months by doubling my interest rate for absolutely no reason, as I have a perfect payment history. I would like to try and find a way out of this mess that would not damage my good credit, or at least not destroy it too much. I feel if the credit card company could eliminate my interest portion for 12 to 18 months, I could salvage this mess until I get back into employment.
I don’t know that you’ll get your card company to withhold finance charges for a year or so, but you might get a temporary reduction in the interest rate if you call and explain your situation. You didn’t tell me who your issuer is, but some of the major card companies are offering hardship programs for struggling borrowers. They’re working with consumers directly in an effort to salvage accounts headed for default.
Several chief players teamed up last week to raise awareness about their hardship programs in a campaign called Help With My Credit. On the Web site, Helpwithmycredit.org, participating companies provide direct phone numbers to their loss-mitigation departments. You could also call the number on the back of your card.
I contacted several card companies about their hardship programs and they supplied the following information.
American Express: AmEx can lower the monthly payment by as much as 40 percent, but typically the reduction is closer to 10 percent to 22 percent, according to spokeswoman Desiree Fish. The company might waive fees and penalties in some cases. Long-term solutions include debt management plans or debt consolidation. Consumers can call (800) 253-1709 to speak with a representative.
Bank of America: Debt relief options include lowering the interest rate, reducing the monthly payment, eliminating fees or referring the customer to a debt management plan. To reach a Bank of America representative, call (800) 500-5306.
Capital One: Distressed cardmembers may qualify for fee waivers, APR reductions, settlements and payment plans. Call (866) 929-5303.
Chase: Chase can reduce interest rates, suspend future late and overlimit fees and extend repayment terms. Cardholders are directed to call the toll-free number on the back of their cards.
Citi: Among the possible breaks: debt consolidation, temporary forbearance, workouts, settlements and rate reductions. Cardholders can call (866) 936-4814.
Discover: Cardholders facing “severe hardships” may get a single-digit APR temporarily. Debt management plans may prove an option in some situations. Discover Card members should call (866) 567-1660 or visit www.cardmemberassistance.com.
Eligibility depends on the person’s situation, ability to pay and account history. Spokespeople stressed that you don’t have to be delinquent to get help.
That said, you might not want to sound the alarm unless a missed payment looms in your near future.
A call made too early before the problem might prompt an account closure or lowered limit, says John Ulzheimer, a CNBC contributor and president of consumer education at Credit.com. “I would wait until you know that there’s a problem that’s imminent — and it’s not coming in six to 12 months; it’s coming in six to 12 days,” he says.
If you’ve started to miss payments or pay late, make the call.
Of course, if you can trim your expenses and make payments without help, that’s your best bet. Regardless of what you decide, see about getting your previous interest rate reinstated. Emphasize your stellar payment history and credit score.
Ulzheimer advises not to disclose that you lost your job, since “you’re basically telling somebody that you have no capacity.” Instead, focus on how much you can afford to pay each month.
Keep in mind there might be a cost to your credit score. If the issuer modifies the terms of your account and reports that you’re paying less than the original amount or according to an altered set of terms, your score could take a hit, says Ulzheimer, who worked a total of 13 years at Equifax Credit Information Services and Fair Isaac Corp.
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