Are You Having Issues Paying Your Bills? Do This….

Many Americans struggle to make credit card payments on time, leading to missed payments that can damage credit scores and rack up more money to pay back. If you’re having financial trouble, paying even the minimum amount necessary might be difficult, potentially leading to a negative debt spiral. The average credit card balance for Americans is $5,221, according to Bankrate. And there’s a growing concern that many credit card bills will become past due as borrowers fall behind on payments. You might be living paycheck to paycheck and struggling to make your credit card payments. We’ve got some options to help you stay on your feet while you try to pay your bills.

Call your credit card company and explain your situation

As soon as you find out you won’t be able to make your minimum payment, contact your credit card company, so they’re aware of your situation. If the company is unaware, they could assume the worst and may take action. Informing your credit card provider can help avoid any harmful consequences and keep you in control. Your credit card company may be able to establish a payment plan that you can afford. The lender could also move your payment due date so that it works better with your paycheck. It could also be possible for you to negotiate a lower APR – the annual interest that you pay on your credit card balance. Whatever you work out, get the details in writing always. Make sure you receive an official confirmation and terms of any changes to your account from your credit card issuer if things don’t turn out how you thought they would. The credit card issuer might also have relief or hardship programs. The goal is not to hurt your credit score, go into arrears (an overdue account), or have your account charged off, meaning it’s written off as a loss and is closed to future charges. Your credit utilization ratio increases when that happens, which can drop your credit score. It can also decrease your credit history, which impacts your credit score.

There’s always credit counseling or a debt management program

Another option for help with credit card debt is to seek out non-profit credit counseling agencies or debt management programs that can help with budgeting. A debt management program allows you to get back on track affordably within your budget while also benefiting from reduced payments and interest rates until you pay off your accounts. These programs can help you find a long-term solution with your creditors based on your budget, making payments more sustainable. They can also negotiate with creditors on your behalf to create a new payment plan.

Rework your budget and find places to save or earn more

If you’re running into budgeting problems making it difficult to pay your bills, consider cutting any unnecessary monthly expenses and applying for government assistance. Some programs can give you an allowance to pay your energy bills – for instance, the Low Income Home Energy Assistance Program. States also offer rental assistance and Temporary Assistance for Needy Families, which help with food, housing, home energy, child care, and job training. Next, consider canceling streaming services or cable, cutting back on shopping, and returning unnecessary recent purchases. Try eating at home more often and cutting back on restaurants and specialty coffees. If possible, work from home to save money on gas. You could also use a “pay as you go” car insurance option if you don’t drive often. These small changes may not be enough to cover your bills, depending on how much you owe, but the money you save can still add up in the long run. Once you’ve nailed down your savings opportunities, start looking for additional ways to make more money on the side. Go through your storage closet of unwanted items and used electronics and list them for sale on apps like eBay.You could start up a side hustle or sign up to be an Uber or Lyft driver. You could also rent your car on Turo when you’re not using it.

Transfer your balances to a 0% intro APR credit card

If your credit score is still good enough – for instance, you haven’t missed any payments yet – consider applying for a 0% introductory APR credit card and transferring your balances. You’ll typically need a credit score of at least 670 to take advantage of one of these cards, but shifting your credit card debt to a 0% intro APR card can save you time and money when trying to pay off credit card debt. However, suppose you’re already in financial trouble and can’t make your current minimum payment. In that case, this may not be the best option for you as you’ll still be expected to make payments on your new card, even during the intro period. If you don’t, your 0% APR period might end early. If you cannot get approved for a 0% intro APR and have multiple credit card balances, consider applying for a debt consolidation loan. Your debt will still collect interest, but you’ll only have one payment to make, and you could get a lower rate overall.

Cons of hardship programs

Although you won’t see them advertised much, many creditors provide hardship programs that help you pay off your credit card debt. The terms vary by lender but can include options like skipping payments or reducing your minimum payment or APR. Generally, you need to apply for the program by contacting your creditor, but there may be specific stipulations. For example, you may need to prove that you’re experiencing hardship. However, the programs have a few disadvantages that could damage your credit score. Here’s what they are. 1. Settling your debt for less than initially agreed upon If you settle your debt for less than initially agreed – for example, if your original debt was $15,000, but you settled for $10,000 – it could damage your credit score because you didn’t fulfill your actual obligation. On the other hand, while you’re focused on paying off your credit cards, you should prioritize settling your debt over your credit score – paying your debt will have a much more significant long-term effect than obsessing over isolated credit components. 2. Issuers could lower your credit limit or close your account The credit card company could reduce your credit limit or even close your account while making payments, which will both ding your credit score. A lower credit limit would impact your credit utilization ratio (the sum of your balances compared to your credit limits) – a significant piece of credit scores – as your total credit used will increase. If your account later gets closed, your average credit age (the length of all your accounts divided by the total number of accounts), another credit score component, will decrease. Your credit utilization ratio and length of credit history are two critical factors in your credit score. 3. Signing up for a hardship program, in general Just signing up for a hardship plan could indirectly hurt your credit score. Your credit card issuer may put a note on your credit report that can alert other potential creditors of your financial problems. Due to the potential negative consequences of hardship programs, it may be best to work through a good relief program with a financial advisor instead.