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If you’re facing financial hardship because of the coronavirus, it can become difficult to afford your credit card bill payments, especially if you’re dealing with a loss of income.
Granting yourself some flexibility may help you adjust your money management strategies, at least in the short term. Once your situation stabilizes down the road, you can shift your strategy once again.
Are you worried about affording your credit card bill payments?
Consider starting with one of these tips:
Ask for the help you need. Credit card issuers are offering assistance during the COVID-19 pandemic, including things like deferred payments and fees, but typically you'll need to reach out to your issuer and ask for such help. Credit card hardship programs may also be available via your issuer if you need longer-term help, again upon request. But such programs may come with drawbacks, including the freezing or closure of your account, or a reduction in your credit limit.
Turn off autopay. Setting up credit card autopayments can be an easy way to avoid late fees, but as your checking account balance gets lower, there can be some drawbacks. To avoid potential overdraft fees, you may want to tweak or shut off any scheduled credit card autopayments. You can adjust autopay to cover the minimum payment only and manually pay more if your budget allows or simply make manual payments for now.
Adjust your budget. Your spending habits may have shifted dramatically — less dining out, entertainment and travel, but more groceries and streaming services. Look through your budget or glance at credit card and bank statements going back a few months. What expenses can you trim easily? Start with subscriptions or memberships you no longer use and consider downgrading a credit card to a no-annual-fee version to keep an old account active at a lower cost.
Should you use a credit card to pay your other bills?
By design, credit cards make it possible to buy something now and pay for it later. Charging up to your credit limit even if you still owe a balance from previous months is normally something NerdWallet cautions against. But during times of crisis, certain traditional credit card rules don't always apply, and your credit limit may be what you need to get by until you’re working again. Keep these factors in mind:
Again, start by asking for help directly. You can call your landlord, utility companies and other service providers to explain your financial situation. Whether it's extending due dates or waiving late fees, many creditors may work with you. Some are offering their own hardship programs.
Weigh the convenience fee. Utility companies, day cares and rent payment services may charge you extra for using a credit card as your payment method. But if you need some extra time to build up your checking account balance, a 2% fee may be worth that convenience in the short term, allowing you to charge the bill on its due date and pay the balance down soon after (ideally, before any interest accrues).
A service like Plastiq is an option where credit cards aren’t accepted. For a 2.85% service fee, Plastiq will charge your card, write a check in your name and send it to the vendor on your behalf: landlords, day cares, homeowner association boards and more. This could be helpful if you need short-term liquidity and don't want to incur an overdraft penalty, make a late payment or draw a cash advance. But if you're unable to pay off such bills each month, interest will make this an expensive and unsustainable service.
What options can help you save on interest?
0% intro APR credit cards
Credit cards offering 0% interest on new purchases or balance transfers can buy you quite a bit of time before interest begins to accrue — often a year or more. If you’re carrying debt on another card, or you anticipate a major purchase in the near future, consider these types of cards. But:
You likely need good or excellent credit to qualify (FICO scores of at least 690).
Many balance transfer cards charge a fee, usually 3%-5% of the transferred balance (there are options that don’t charge this fee).
Once the promotional no-interest period ends, you’ll owe interest on any remaining balance.
A personal loan can be used to consolidate several debts into one monthly payment, ideally at a lower interest rate. Again, applicants with good to excellent credit generally have more loan options available to them, but there are loan products geared toward consumers with lower credit scores.
» MORE: Where to get a personal loan