Credit card forbearance programs offer debt relief to consumers.
Entering into a forbearance plan is yet another way to get relief from your credit card debts. It will only provide short term assistance though. Many credit card companies, including Bank of America, Citibank, and Discover Card, are providing one or more types of forbearance programs to consumers who are struggling with paying their credit card bills or debts.
What is credit card forbearance?
It is a short term suspension of any payments you need to make. Forbearance provides you with a break from having to make your entire monthly credit card payments for what usually amounts to several weeks up to maybe several months. It is when a credit card issuer provides you with a temporary reprieve on your monthly payments that will usually last for a couple months, but the length will vary. It isn't forgiveness of your obligations, but it is a temporary reprieve from your debts. There are different types of forbearance programs.
One is a postponement of your debt for six months, a year, or, very rarely, even longer. During this timeframe your interest will continue to accrue on your account, however you may get a reduced interest rate so that while your interest will accrue, it will be not be at as high of an interest rate as you currently have.
There are additional programs though. Another type of forbearance will offer consumers a lower monthly minimum payment, elimination of late fees and charges, and/or a reduced interest rate.
Citibank credit card forbearance programs
Citi is helping hundreds of thousands of customers with their credit card debt. As just one example, just a few years ago Citi provided almost 400,000 customers with some form of forbearance program in just 3 months. In addition, most of the cardholders were able to participate in longer term relief programs that helped them in multiple ways, including Citi offering balance consolidation actions, adjustment of loan terms, and lower interest rates. This has data been confirmed in reports issued to the federal government.
Citi is offering customers new forbearance programs with broadened eligibility criteria and are thereby helping customers who have accounts in earlier stages of delinquency. This is according to a report filed for its participation in the federal Troubled Asset Relief Program. The report continued by saying that Citibank is offering payment incentives, credit card-consolidation loans and programs that accelerate the reduction of debts without increasing the cost to consumers. In addition, Citibank went on to say that it was continuing to increase programs to help customers who are current on their bills and accounts but are beginning to find themselves in need of help, so they are taking pro-active action. Find out more about Citibank debt management plans.
Bank of America credit card forbearance programs
Many customers of Bank of America are struggling to pay their bills and meet their overall financial obligations, and BOA has committed to helping those customers who are experiencing some short term financial difficulties. This is according to Ms. Riess, who is a Bank of America spokeswoman. They have stated that if a customer falls behind on an account or cannot afford to make regular payments, their customer assistance department proactively reaches out to them to explore options, including forbearance programs or other assistance, including Bank of America debt consolidation loans.
Just a couple years ago, Bank of America modified nearly 850,000 credit card loans and offered them forbearance or other relief. The amount of people being assisted and the pace of programs being offered is increasing. Over the past year, they have increased their efforts to reach out to customers who fall behind on their bills even earlier in the delinquency cycle before their financial situation becomes too difficult to recover from.
Bank of America always recommends that if you think you are going to fall behind on your debts or have difficulty staying current with your monthly payments, then reach out to your lender, no matter who it is. The earlier you did this, the better the chance for successful debt relief.
Discover Card forbearance programs
They also continue to increase their customer assistance forbearance programs. Discover Financial Services has over 50 million Discover Credit Card holders, and they are providing relief to hundreds of thousands of people who are struggling with paying their bills on time. A Discover spokesman said that they have been proactively identifying and calling thousands of customers who are struggling with paying their credit card bills, and who may potentially be in financial distress. They are also providing options for debt relief to those who come to them directly,
Discover Card is continuing to increase both its call-center operations and its online business that was created to serve those credit card members who are looking for help. Assistance offered by Discover can range anywhere from individualized payment plans and options to deep reductions of interest rates being charged. These, and other solutions, are made available to those people who are experiencing severe financial hardships or emergencies.
Another side benefit is that Discover Card will stop sending blank checks, balance transfer offers, and the sometimes overwhelming promotional mailings to those customers that are behind on their bills. Find how to get additional help from Discover card. Continue with credit card debt assistance.
Chase credit card forbearance assistance
At Chase, customer service representatives as well as debt counselors have the ability to modify and restructure credit cards terms and loans by suspending future late or over-limit fees, reducing interest rates, and/or extending repayment terms. Also, find out about a debt management plan from Chase. More.
As with most other credit card issuers, Chase also encourages credit card consumers who are having difficulties with repaying their credit card debts to reach out to a certified credit counselor or their creditors for assistance. These various specialists and professionals can offer guidance and information on solutions that may be able to get people back on track with paying their bills. Chase also recommends that individuals reach out for assistance before they fall behind on their monthly payments as it will help ensure the best possible arrangements for the customer.
Are forbearance programs successful?
Studies show that most (78%) of consumers who sign up for and follow a forbearance program stay current on their monthly bills, with only 22% of card holders defaulting again. In addition, the average FICO scores for the 78% of consumers who were successful rose by 20 points, indicating an improvement in their overall risk profile and that the programs do in fact work. This shows and proves the notion that credit card companies that offer forbearance plans to people who are struggling with paying their debts overwhelmingly helps them back on their feet and cure a pending default.
Credit card forbearance typically isn't reported to the credit bureaus. However there can be exceptions and check with your lender or bank. Note that forbearance on student loans usually is reported to the rating agencies, so there will be an impact to your scores in those cases.
As indicated, forbearance programs will generally not impact your credit scores, as late fees are generally waived for the period in question. This means that you won't get a poor score or delinquency mark on your credit ratings.
Debt and non-profit credit counselors, as well as many banks and credit card issuers, strongly suggest that cardholders who encounter medical emergencies, lose their jobs, or who may find themselves with other emergencies or in other financial predicaments should contact their credit card company before their situation becomes too severe, difficult or impossible to recover from.