What to do if you can't make your minimum credit card payments

With an estimated 18 million Americans are unemployed, many people are struggling to keep up with their minimum monthly credit card payments. Here's what to do if you're unsure how you’ll make your payment this month. (iStock)

Whether you've invested in rewards credit cards, cashback cards, mileage reward cards, or a secured card, one thing holds true about all types: they each come with a monthly payment. But what should you do if you can't make your minimum credit card payments?

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Unfortunately, in light of the spread of coronavirus, many Americans are facing financial difficulty. An estimated 18 million Americans are unemployed and many of those are unable to keep up with their monthly credit card payments, their bills are past due and their statement balance continues to grow out of control.

Aside from taking a closer look at your spending habits, below is an explanation of what to do if you can't make your minimum credit card payments. Here are four money management tips to give yourself the best chances of making it through this crisis with your credit score intact.

  1. Contact your credit card company
  2. Consider utilizing a balance transfer card
  3. Think about consolidating your debt with a personal loan
  4. Prioritize cards with larger balances

1. Contact your credit card company

As soon as you realize that you're going to be unable to keep up with your credit card payments, your first move should be to contact your credit card issuer. Typically, you'll find their phone number listed on the back of your card.

While issuers usually offer some sort of credit hardship program, many are offering special assistance in light of the effects that the pandemic has had on the economy. Most companies offer an emergency forbearance option, which allows you to reduce or skip your minimum credit card payments for a set period of time. Beyond that, they may be able to waive existing late fees or annual fees, or temporarily reduce your interest rate.

When you talk to your issuer, It's important to be upfront about the fact that you've been impacted by the spread of the coronavirus. You’ll also want to explain that you are currently unable to keep up with your minimum payments. From there, you’ll want to ask what credit card hardship programs are available to you and how you can access them.

WHAT IS A CREDIT CARD HARDSHIP PROGRAM?

2. Consider utilizing a balance transfer card

if you still have some money coming in, another option might be to open a balance transfer card. As the name suggests, these credit cards allow you to transfer existing credit card debt from multiple cards into one balance. This will lower the number of payments you have to worry about making each month and will likely reduce the total amount of interest charges that will accrue on your unpaid balance.

If you think opening up a balance transfer credit card might be the right choice for you, you can explore your card options by visiting Credible.

HOW TO GET A BALANCE TRANSFER CREDIT CARD

Additionally, some of these cards also offer 0% APR introductory interest rates, which can prevent interest charges from accruing on your balance transfer for a set period of time. However, if you decide to go this route it's important to make sure you understand how long the 0% APR period on a balance transfer will last. That way, you will know how long you have to get back on your feet before interest charges start accruing.

3. Think about consolidating your debt with a personal loan

Another option is to consolidate your credit card debt using a personal loan. Again, this method involves consolidating multiple credit card balances into one monthly payment. With this method, you would take out a loan and use the funds to pay off any existing credit card balances.

While monthly payments would still be required with this option, you will reduce the number of monthly payments you have to worry about making and you'll likely be able to secure a better interest rate. According to the most recent Federal Reserve data, while the average interest rate on a credit card is 14%, the average interest rate on a personal loan is only 9%.

Borrowers who are considering taking out a personal loan should consider using Credible to get a sense of their debt consolidation loan options.

SHOULD I USE A PERSONAL LOAN TO CONSOLIDATE DEBT?

4. Prioritize cards with larger balances

Lastly, if you are unable to keep up with all of your credit card payments, prioritize paying the minimum amount on the cards with the highest balances. Put simply, these balances are likely to have the biggest effect on your credit score if neglected, so you’ll want to do all you can to keep them in good standing.

That said, it’s important to note that missing a payment on any of your cards will still have an effect on your credit history. Payment history accounts for 30% of your total credit score, so prioritizing payments should only be considered after you've exhausted all of your other options.

TYPES OF CREDIT CARD RELIEF YOU CAN REQUEST

The bottom line

When you're experiencing credit hardship, it can feel overwhelming. However, it's important to keep in mind that there are assistance options available to you. Use the tips above to help you formulate a plan for how you're going to keep up with your monthly payments.

Additionally, don't forget to use free resources like Credible for more information on the specific options that are available to assist with your unique financial situation. That includes finding a more appropriate credit card for your financial needs during this time.