Poll finds COVID-19 has dealt the most devastating blow to the most vulnerable. People who already had the smallest financial buffer. And as a result, many are now scrambling to figure out how to manage their debt, including debt on their credit cards.
“My bank account is completely empty, it’s probably, right now as we speak, overdrawn by $38,” said James Frazier of North Philadelphia.
Frazier has been out of work since July but still has bills to pay.
“Electricity, gas, water, cable, phone, I paid my car insurance that’s due,” he said.
And for many consumers, credit card bills continue to roll in, too.
“Many people have lost their jobs or are facing economic hardship because of the coronavirus pandemic,” said Kevin Doyle of consumer reports.
Two in three households report serious financial problems and no way to pay off their debts, including debt on their credit cards.
So First tip: Don’t just stop paying. Contact your credit card company.
“What they might do is allow deferred payments or reduce or suspend interest charges,” Doyle said.
In a LendingTree survey, 91% of consumers who asked for a break on their payments got one. And under the Coronavirus Relief Act, your credit score cannot be negatively affected if you meet the terms of the new payment agreement.
Just make sure you get this agreement in writing and understand how you will be required to repay these deferred payments.
Tip two: Open a balance transfer card.
“These can be interest-free for sometimes 12 months, sometimes 15 months or more, which can very easily temporarily relieve financial pressure,” Doyle said.
But CR warns that you need to have a decent credit score to get a balance transfer card.
Tip three: Don’t pay off your credit cards if you don’t have emergency funds.
“Having a six- or 12-month emergency fund is more important to you than paying off your credit card balance in full each month,” Doyle said.
tip four: Do not use your credit cards to pay medical bills, taxes, mortgage payments or student loans.
“There are much better options for dealing with this kind of debt than putting it on a credit card,” he said.
For example, federal and state programs forgive hospital debt for families who meet certain criteria.
Tip five: Beware of using your credit cards as your emergency fund can be a dangerous proposition.
“They can be withdrawn for no reason. If the credit card issuer wishes, they wish to close the account, they can,” he said.
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