Are you finding it increasingly difficult to pay your credit card bills? Perhaps you made purchases when you were comfortable with the payments, but now your financial situation has changed. Maybe you’ve encountered an unexpected challenge, such as a medical emergency, divorce, or natural disaster, that has made it harder to keep up with your credit card payments.

Feeling overwhelmed by credit card debt is stressful, and making late payments or missing them entirely can harm your credit score.

Thankfully, there are options for consumers struggling to repay credit card debt. One such option is a credit card hardship program. A credit card hardship program is a structured solution designed to assist consumers who are at risk of defaulting on their credit cards.

How do credit card hardship programs work?

The average credit card interest rate is over 20%, and many credit cards impose costly penalties for late payments. This combination makes it difficult for financially challenged borrowers to escape their cycle of increasing debt, especially when facing financial hardship.

Financial hardship occurs when a consumer experiences an unexpected setback that makes it difficult to meet financial obligations. Common causes include illness, divorce, accidents, or job loss. A credit card hardship program is a financial arrangement designed to help those in such situations negotiate more manageable payments on their outstanding credit card debt.

The specifics of a hardship program depend on your credit card issuer and your financial situation. A hardship program may offer any combination of the following temporary measures to make your credit card debt payments more manageable:

  • Due date extensions
  • Lowered interest rate charges
  • Pauses in payments and/or interest charges
  • Reduced minimum payments
  • Waived late fees

Modifications permitted under a credit card hardship program can lead to substantial savings, potentially amounting to thousands of dollars saved in interest and fees. However, these programs are not permanent and often expire after three to 12 months.

Unlike debt consolidation, where you combine your debts into one, a hardship program allows you to keep your existing credit cards and payments until you can get back on track.

Who qualifies for hardship loans?

Anyone struggling to pay their credit card bills due to financial hardship may qualify for a credit card hardship program.

“These programs are designed to provide relief to individuals facing genuine hardships, such as a sudden job loss, significant loss of income, medical emergency, or other unforeseen event that has caused a major drop in income or an increase in expenses,” says Jon Morgan, CEO of Venture Smarter.

Other qualifying hardships include serious and costly illness or injury, divorce, a family emergency, or a natural disaster.

“The requirements for qualifying for a credit card hardship program vary by issuer,” explains personal finance expert Andrew Lokenauth of TheFinanceNewsletter.com. “Common eligibility requirements include being current on your payments for at least six months, having a good credit history, and being able to prove you are experiencing financial hardship.”

Most lenders and banks will require documented proof of your hardship, such as a job termination letter, medical bills, or financial statements.

“Many institutions also require that the consumer meet with a credit counselor or complete a debt management program to qualify,” says Laura Sterling, vice president of marketing for Georgia’s Own Credit Union.

What are the pros and cons of a hardship program?

A credit card hardship arrangement has benefits and potential drawbacks.

Pros

“On the plus side, you may be allowed to pause or lower your payments. Your interest rate may be temporarily reduced. You’ll likely be allowed to make lower monthly payments without being charged late fees. And you could avoid seriously damaging your credit,” says Lokenauth. “Most importantly, it will provide extra time to help you get back on your feet financially.”

Other advantages include the opportunity to avoid default or bankruptcy and reduced financial stress.

To illustrate the benefits of a credit card hardship program, imagine you have a credit card with a $5,000 balance and an interest rate of 20%. You’ve lost your job and can no longer afford the minimum monthly payment of $200.

“With a hardship program, let’s say the bank agrees to reduce your interest rate to 5% and lower your monthly payment to $100. Over the next 12 months, you pay a total of $1,200 instead of $2,400, making it more manageable while you search for a new job,” says Morgan.

As another example, assume you face unexpected medical expenses of $3,000, which you charge to your credit card. The card assesses an interest rate of 18%, but after entering into a hardship program with the card issuer, your interest rate is lowered to 8%.

“Here, you can potentially save $300 in interest charges over the course of the year,” Morgan says.

Cons

Being in a credit card hardship program may temporarily negatively impact your credit scores. Participation in these programs, as well as any missed payments, can still be reported to the three credit bureaus.

Additional disadvantages include:

  • Your credit card account may be frozen while you’re enrolled, preventing you from using the card. While this may be helpful from a financial perspective, it can be challenging if you’re still relying on the card for living expenses.
  • Even if payments are paused, card issuers can continue charging interest during your program participation, causing the balance on your card to rise while payments are paused.
  • The plan may extend your borrowing terms and increase the total interest you’ll pay.
  • You may be obligated to set up automatic payments from your bank account to ensure the credit card gets paid, which could create an additional challenge if you’re already juggling payments as funds become available.

How to apply for credit card hardship programs

To inquire about and enroll in a credit card hardship program, contact your credit card issuer directly and ask if they offer one.

“Many major credit card issuers, including Chase, Citibank, Bank of America, and American Express, offer these programs,” Morgan says.

However, you’ll need to initiate the conversation.

“Credit card issuers do not advertise credit card hardship programs, even if they do provide them. So if you have a hardship, it’s best to reach out to your issuer directly to see what assistance they offer,” says Sterling.

Once you’ve reached out to your lender, prepare to take the following steps:

  • Document your hardship. Prepare, gather, and submit documentation that proves your financial difficulties. For example, if you have lost your job, you may need to provide your termination letter. If you have experienced an illness or accident, you could provide your medical bills or pay stubs showing a reduced work schedule.
  • Negotiate and agree to the terms. “Discuss the available options with your bank, including reduced interest rates, waived fees, lower monthly payments, or a temporary suspension of payments,” says Morgan. Note that you may be required to sign a program contract to enroll.
  • Complete the program according to the rules. Make your new monthly payments on time, stick to the agreed-upon terms, and comply with any program requirements. Pay close attention to the program’s expiration date.

Alternatives to hardship programs

Entering into a credit card hardship program isn’t your only option. Here are a few alternatives to consider:

  • Apply for a balance transfer credit card. This type of card allows you to transfer your existing card balances to a new credit card with a 0 percent introductory APR. This intro rate typically lasts between 12 and 24 months and can save you a significant amount in interest.
  • Look into hardship loans. Hardship loans may offer lower interest rates for those recovering from financial setbacks. For example, many borrowers applied for COVID financial hardship loans during the pandemic. Alternatively, a personal loan with a low interest rate and low fees could also be a viable option.
  • Explore a debt consolidation loan. Debt consolidation loans allow you to borrow a lump sum to pay off multiple existing debts. The goal is to find a debt consolidation loan with a lower interest rate than your current loans to save on interest charges.
  • Pursue credit counseling. A certified credit counselor can help you create a personalized budget and explore debt management options. Credit counseling services are available through both for-profit companies and nonprofit organizations, including credit repair companies.
  • Investigate debt settlement. With this option, you or a debt settlement company will negotiate with creditors to pay off your debt for less than what you owe. This can save you money but proceed with caution — debt settlement could harm your credit score.
  • Consider bankruptcy as a last resort. Filing for bankruptcy has a significant impact on your credit score for seven to 10 years, depending on the type of bankruptcy. While it’s not a decision to take lightly, bankruptcy can help you get out of overwhelming debt and move forward financially.

In Conclusion

Mounting credit card debt can leave you feeling overwhelmed and anxious, especially during financial hardship. However, a credit card hardship program can ease your financial burden by offering more manageable repayment terms while you recover.

“Make sure to do your research and explore all available options before committing to a credit card hardship program,” says Lokenauth. “Also, read the fine print carefully and ensure you understand all the terms before signing or committing to anything.”