Credit card providers are drawing the shades on consumer payment holidays. What’s next for struggling cardholders? (iStock)
The U.S. credit card payment holiday ended on October 31, 2020, and for millions of credit card consumers struggling to keep up with payments due to the pandemic-fueled lockdowns, the post-holiday outlook isn’t exactly crystal clear.
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“Credit card payment holidays were extended to cardholders experiencing financial hardship as a result of the coronavirus outbreak,” said Andrea Woroch, a family finance expert at AndreaWoroch.com. “They waived payment requirements and canceled late payments during this time so you weren’t on the hook for your minimum due.”
Credit scores were protected, too, during the card payment holiday.
“The other plus was that non-payments or late payments didn’t end up on your credit file. However, with the credit card file about to expire, any non-payment will now be reported to the credit bureaus and that means your credit score will take a hit. Plus, cardholders may be slapped with late fees or higher interest rate penalties for missed, late or outright non-payments.”
Depending on the credit card provider, consumers could count on some form of payment relief from card debt throughout the past seven months – in the heart of the pandemic.
Bank of America, for example, allowed customer payment deferrals if they were struggling financially. Capital One offered customers a menu of relief options, including the waiving of interest and fees for consumer and business cardholders, along with minimum payment assistance and deferred loan payments.
During the pandemic, cardholders like Citi have also offered credit line upgrades, payment forbearance (a temporary suspension of card payments), and increased fraud protection assistance.
Now those credit card payments are back on the schedule – whether cardholders are ready or not.
“The COVID payment holiday set into effect by the CARES Act, allowed credit cardholders to postpone or defer payments on their credit card obligations in the short to intermediate-term,” said Adem Selita, founder of The Debt Relief Company in New York City, N.Y. “Unfortunately, the holiday was never meant to be a long-term solution for consumers still struggling financially and does have an expiration date."
What to do when your credit card payment holiday ends
With most card companies adhering to the October 31 deadline for payment holidays, what options do credit card consumers have now – even as the pandemic rolls on? Financial experts advise that consumers stay calm, carry on, and apply these tips and strategies if they can’t meet their credit card payment obligations.
- Be proactive
- Ask about ongoing hardship programs
- Get a zero balance transfer credit card
- Opt for a debt consolidation loan
1. Be proactive: The credit card payment holiday expired on October 31, but anyone who is still struggling financially may have options.
“Get on the phone with your credit card company and explain your situation,” Woroch advised. “If you have the ability to pay some of your bill, but not all, you may be able to negotiate a lower payment amount. Otherwise, you may qualify for an extension. Some cards may also offer tailored support based on a cardholder’s financial situation. Any extension may be set on a case by case basis so those individuals who aren’t financially impacted don’t take advantage of payment deferral programs.”
2. Ask about ongoing hardship programs: Even without a payment holiday, all credit card companies have in-house hardship programs that go further.
“Absolutely stay in touch with your credit card company,” said Todd Christensen, education manager at Money Fit by DRS, a nonprofit debt relief agency in Boise, Id. “If the credit card companies don't know your situation, they will assume the worst.”
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3. Get a zero balance transfer credit card: Consider transferring your credit card balance to a new card offering 0% interest on balance transfers.
“You can find some options available for anywhere from 12 to 21 months, based on the card's promotion,” Woroch said. “You won’t accrue interest and so your minimum monthly payments actually go fully toward your principal balance, helping you chip away at your debt faster without fees building up.”
Financial consumers can compare balance transfer credit cards at sites like Credible, where card users can choose from numerous zero balance credit cards in just a few minutes.
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4. Opt for a debt consolidation loan: While extending one’s debt burden with another loan is always a big decision, debt consolidation can make things easier for anxious credit card consumers.
“A debt consolidation could definitely help overcome a short-term cash hurdle, especially if the effective APR paid will be much lower than a cardholder’s current card interest rate,” Selita said. “However, the main issue with debt consolidation loans is that they will typically increase your monthly payment (relative to credit card minimums) and aren’t always a viable cash flow solution.”
If a debt consolidation loan makes sense, visit Credible, where borrowers can check personal loans with interest rates as low as 4.99%, without damaging their credit scores.
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