Credit card hardship programs provide help with credit card debt and bills.
If you are considering a credit card hardship program to help pay your credit card debt and monthly bills, find out how these plans work. Learn how they can help you by offering a short or long term solution. During today’s difficult economic times, it is becoming common for lenders as well as banking institutions to encounter situations in which good cardholders and people with formerly strong credit scores miss an occasional credit card payment because of a one off financial situation. Hardship programs have been created by a number of credit card companies to assist in that exact situation.
Most of the solutions are aimed at solving one off emergencies. They were created as a result of the still challenging economic times. Due to the ongoing need for assistance by borrowers, many financial institutions and banks, including credit card issuers such as Bank of America, Citibank, Discover, and Capitol One, provide credit card hardship programs. These resources have been created to help credit card holders maintain their debt, pay their bills, and keep their credit ratings high.
Even banks realize it is in their best interest to provide relief, as they know that an illness or job loss can lead to serious financial hardship. Most local as well as national lenders are trying to work more with people as they would rather receive some money from you then see the consumer file for bankruptcy, in which case the bank will receive zero on your outstanding debt.
What is a credit card hardship program?
These are programs that are similar to loan workouts, and the goal is to help borrowers avoid a default. They can in effect help them restructure their credit card debt to make it more manageable. It is an agreement between the borrower and the credit card company.
While the terms and conditions can change, in general under the agreement made between these parties, the borrower sets up a payment plan with the credit card company. After that has been done the bank will then reduce the interest rates and will even sometimes lower your monthly payment to a level you can afford to pay each and every month. Some companies call their programs by different names, such as the Chase Proactive Solutions program.
Can my outstanding balance really be reduced?
While the answer is yes, you do need to keep in mind that it is still unlikely that credit card issuers will reduce the amount you owe on your debt as a part of a hardship program. However, more and more cases of debt reductions are now being reported by banks such as Capitol One, HSBC, and Bank of America. More.
Remember that the main reason that banks are offering more and more hardship programs is that they hope that you, as a consumer, will get back on a solid financial footing. After that occurs they hope that you will soon be able to return to making full payments on your account and monthly credit card bills. Like almost all businesses, credit card companies and banks are primarily concerned about making a profit.
While it is not likely, it is still possible that a bank or lender will reduce your credit card balance if they see that you are heading towards a bankruptcy filing. Usually what will happen in this case is that they will eventually agree to a lump-sum settlement plan with you to close out your current account. More on debt settlement. If they do agree to settle your unpaid debt, the amount that is agreed upon will vary depending on your particular financial condition and the relationship that you have with the bank.
Who won’t a hardship program assist?
Credit card hardship programs aren’t targeted towards those people who have lived beyond their means by overextending their credit card limits and are looking for a quick as well as easy way to get out of debt. Typically these plans are reserved for those life-changing events which cause financial emergencies and hardships, such as a job loss, an illness, a divorce, unexpected reduction in income, accidental death in the family, or a disability.
A Payment Protection Plan and a credit card hardship program differ. Some borrowers get these terms confused. A Payment Protection Plan (PPP) is really a paid supplemental loss-of-income insurance policy. A PPP provides an alternative source of income to a borrower during those extreme and difficult life events like an illness, unpaid family leave, or involuntary unemployment. The insurer who offers the payment protection plan thru the credit card issuer will pay your credit bills for a fixed period of time, and it will usually range from 3 to 12 months.
Do people really save and get help?
Absolutely. Hundreds of thousands of consumers are receiving assistance from these hardship programs, and they are helping many folks reduce and even eliminate debt. Find examples of actual customers receiving aid from the Chase, Citibank, HSBC, Capital One, Bank of America, GE Money Bank, American Express, and Discover credit card hardship program.
How do I apply for a credit card hardship program?
Very few banks or credit card companies advertise hardship programs, so it is not always easy to apply for them. You can browse their website for information, but it is oftentimes not easy to find there either. Find a list of credit card hardship programs from various credit card issuers including Citi, Bank of America, and more.
Probably the best step to take to try to apply is to just call your credit card issuer and ask about a program that they may offer. It is suspected that some customer service representatives from various banks, such as Chase and Discover Card, are empowered to offer credit card assistance right over the phone. So a phone call declaring hardship is often beneficial.
In the interview process that will need to occur, you will have to tell the company about your sources of income, your expenses and other obligations. You need to be prepared and to make sure that you have all that information ready before you call in to them asking for help. You should expect that the bank and lenders will want to know about how you are going to pay off your bills and eliminate your debt, and they will also want to know when they can expect your regular monthly credit card bill payments to resume. Find some additional pros and cons of a credit card hardship program, as well as other options. Read more.
The process can take time as well, and some people find it complicated. Also find other tips and steps that you help you with entering into a hardship program.
What are the disadvantages?
Nothing in life is perfect. Credit card hardship programs have some cons associated with them and potential downsides. For example, there is absolutely no guarantee that you will be able to reduce the interest rates you pay from say 20% to 2%. You are also not guaranteed to have your total outstanding debt reduced.
In addition, some credit card issuers may decide to lower the spending limit on your cards or they may even decide to close your credit card account altogether. Many banks also have rules that make it difficult when trying to sign up for a hardship program. Most are for one time events, such as a life crisis. Last, but not least, enrolling in a hardship program may very well impact your credit score and be indicated on your credit report for a period of time.
The bottom line is that you need to review all the all the pros and cons of a credit card hardship program before applying. An alternative solution for people to consider is to deal with a counseling service. These free, often non-profit services can help you create and implement an appropriate debt management plan. Any program put into place will be strictly based on your total household income and also expenses. Also, credit counselors can contact your lenders to work directly with them on a hardship type plan, negotiate, and to try to reduce both your monthly payments as well as the interest rate you pay.