Saturday, December 17, 2011

Can You Claim Hardship on Credit Cards?

Unexpected expenses, loss of income and spiraling debt can make it difficult, or impossible, to pay even the minimum payments on your credit cards. Many credit card companies offer hardship programs that help you make reduced payments on your credit card balances until you can get back on your feet financially and meet your obligations.

How Hardship Programs Work

    Hardship programs offered by credit card companies usually work by reducing minimum payments, erasing over-the-limit or late charges, and reducing or eliminating interest charges for a limited period of time, allowing you to pay down the balance on your credit cards until you are financially on more stable ground.

How to Ask for Hardship Progams

    The first step in asking for hardship relief from your credit card issuers is to put it in writing, for yourself and for the credit card companies. List financial problems that have contributed to your inability to make your payments, such as an illness or injury that has resulted in high medical bills and an inability to work or a job loss. Know how much income you have to pay toward your credit card bills after your basic living expenses are paid.

    Contact your credit card issuers by phone to ask for hardship leniency. Keep detailed notes about your conversations with representatives, and ask to receive a copy of any agreement you reach in writing. Be willing to submit your hardship letter in writing, as well.

Facing a Possible Credit Freeze

    Taking advantage of hardship programs offered by credit card companies is an excellent way to reduce your financial obligations until you're back on your feet, but be aware that agreeing to a hardship program often means foregoing credit.

    One of the stipulations of most hardship agreements is a freeze on your account that makes it impossible to use the card during the term of the agreement. While this credit freeze prevents you from incurring more expensive debt, it can be difficult if you've been using your credit cards for basic living expenses.

Keeping Your End of the Bargain

    One common pitfall of credit card hardship programs is agreeing to terms that you simply cannot meet.

    To be safe, offer the credit card company an amount that's less than what you can afford to pay, leaving yourself room for negotiation. "You definitely do not want to be in a position of being unable to make payments if you can get your lender to agree to your request for a hardship program," writes Bankrate's Steve Bucci.

    And make your payments on time, every time -- a late or missed payment can void the terms of your agreement, putting you back on the hook for higher minimum payments and finance charges.

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