What if You Can't Pay Your Credit Cards Because of a Work Reduction?

When times are tough, businesses often scale back. Scaling back does not always mean layoffs; instead, it can mean reduced hours at work. For employees, this can be a big blow to the household budget. If this has happened to you and you now cannot pay your credit card bills, taking action can prevent constant debt collection calls and a poor credit score.

Revise Your Budget

The first thing to do to set your finances in order is to revise your budget. Write down your new monthly income as a result of the work reduction and list all of your expenses. Divide your expenses into two categories: necessities and wants. Necessities are items essential to living such as food, housing, transportation of some sort and insurance. Eliminate wants until your budget is balanced --- i.e., your income is the same or more than your expenses.

Prioritize

Next, prioritize your debts. Write down who you owe, how much you owe and the total amount you can afford to pay each month, even if that's nothing. Then you need to decide who you can't pay. List the name and phone number of the creditor along with your account number next to the debt.

Contact Your Creditors

Call your creditors to explain the situation and ask if they can provide assistance. Some credit card companies will offer you a few months of no payments so you can straighten out your finances, while others will pressure you for a payment today. Be willing to negotiate, but be clear on your limited ability to pay. Offer a small payment, even if it's only $10 a month. If you cannot pay anything, clearly state the solution you are seeking, such as two months of waived payments so you can find a second job to pay your debt. Creditors are more likely to work with you if they know you are trying to find a way to pay them.

Improve Your Situation

While a reduction in hours at work can throw off any budget, it doesn't have to be permanent. Continue to trim your expenses as much as possible while also seeking more employment like freelance work or a second job to earn more money. Repaying your debt, even if it's on negotiated terms, will keep your credit score from tanking completely.