When you face an unexpected financial crisis, you might wonder how you’ll be able to keep up with your monthly credit card payments. One option you might not have considered is to talk to your…

When you face an unexpected financial crisis, you might wonder how you’ll be able to keep up with your monthly credit card payments.

One option you might not have considered is to talk to your credit card issuer about a hardship program. Before you call the company, determine the type of help you might need and figure out whether this is a temporary financial setback or a major life change that might need a longer-term solution.

What Are Credit Card Hardship Programs?

Credit card companies offer hardship programs to provide immediate relief to customers dealing with a financial crisis. Companies might forgive late fees, reduce or waive minimum payments, or freeze interest rates.

“Every case is different, and we offer several options to those who need assistance,” says Discover Financial Services public relations specialist Brittney Mitchell.

Capital One encourages customers to reach out to the company to discuss individual circumstances, Capital One communications manager Derek Conrad says. “Assistance provided to our impacted credit card customers could include temporarily waiving or refunding certain credit card fees,” he says.

Some card companies, such as American Express, spell out the options and potential ramifications on their websites and provide contact information.

[Read: Best Credit Cards for Bad Credit.]

Situations That Might Qualify for Credit Card Hardship

Credit card hardship situations are typically unforeseen circumstances, such as major medical issues, loss of employment or the breakup of a marriage, says Peter Klipa, senior vice president of creditor relations for the National Foundation for Credit Counseling.

Matt Schulz, chief industry analyst at personal finance site CompareCards by Lending Tree and a former U.S. News contributor, says, “These hardship programs aren’t supposed to last forever, but can be useful for a little while so you can get back on your feet after a difficult situation.”

For example, a hardship program can help you bridge the period between jobs, address financial commitments while waiting for medical insurance payments to come in, or help you while you look for different sources of income during a divorce or after a spouse dies, Schulz says.

Credit card companies might not be as understanding if your financial troubles are caused by overspending and mismanagement of funds, which they can see because they have a record of all of your transactions, Klipa explains.

Schulz says, “It’s important for people to remember this isn’t just for people who ramp up a lot of debt — you need to have an honest-to-goodness hardship.”

Why Companies Grant Hardship Requests

Because credit card companies want a strong, long-term relationship with their customers, it’s in their best interest to work with you when you have a temporary financial emergency.

“Your creditor wants to talk with you, understand better what’s going on,” Klipa says. “Hopefully, the lending arrangement is one that will be lasting. In any kind of lasting relationship, you want to have that ongoing dialogue.”

Some consumers are afraid of having a difficult conversation with a credit card issuer, but Schulz says it’s helpful to realize that “people have more power over credit card issuers than they realize they do.”

Even though issuers may not welcome you with open arms when you ask for a break, if you have a good track record with them, they’ll be more willing to work with you, Schulz says. “It stands to reason if you’ve had a card for 20 years and this is the first time you’ve asked for something, you’re more likely to be thrown a lifeline than someone who has only had it for a few months,” he says.

[Read: The Best Credit Cards for Fair Credit.]

How Do You Start the Hardship Conversation?

Call the credit card company as soon as you realize you’re facing financial difficulty that could impact your payments. But make sure you first organize your finances and know what kind of help you need.

“The sooner you call a credit card company, the easier it is to find solutions,” Klipa says. If you wait several months, it will be “increasingly difficult to get back to anything that looks like the original arrangement. You’ll tie the credit card company’s hands if you wait too long.”

It’s possible that the first representative you talk to will handle your request, says Klipa, who also worked at Discover Financial Services.

“They want to be good listeners and understand your situation,” Klipa says. They want to know if this is a “fundamental shift that’s permanent or one that’s just a short-term type of need before the situation resolves itself.” If you’ve been delinquent on your payments for several months, it’s more likely you’ll work with a specialized representative “because the situation gets increasingly complex.”

It’s probably a waste of time to shop around among different representatives at the same company, though, because they all have similar hardship plan guidelines and training, Klipa adds.

Preparing for a Hardship Conversation

Before you call a credit card company to ask for hardship consideration, write notes that will help you succinctly describe your situation. Customer service representatives will listen to your story and then offer ideas on a suitable resolution to the issue, Klipa says. Typically, late fees are one of the first issues in play, as well as interest rates.

“There are a lot of different solutions credit card companies have for this, but it typically involves some combination of late fee forgiveness, fee suspension, interest rate reduction or restricting or re-age of debt scenario,” Klipa explains.

For example, the credit card issuer could suspend interest for 30 days on the account, reduce the interest rate itself and try to get a commitment you’ll make at least part of the minimum payment. A creditor might ask for documentation of the hardship and/or for the consumer to make the request in writing. Once an agreement is reached, a creditor is likely to send a letter spelling out the details, Klipa says.

Credit Card Hardship Plan Drawbacks

Although the credit card company is doing you a favor when it allows you to enter into a hardship agreement, it will make sure to protect itself as well, usually suspending the account to prevent further financial damage.

“The bank is essentially giving you a break on that card and wants to make sure you’re not just going to take advantage of that break and keep digging yourself a hole,” Schulz says.

The change of account status as well as other changes in the cardholder agreement will likely be reported to the credit bureaus and could hurt your credit score and ability to get other credit.

“If you are going to apply for a new credit card, mortgage or loan in the near future and the lender sees that notation on your credit report, it can raise some red flags for sure,” Schulz says.

A hardship plan — and the likelihood that your account will be closed, at least temporarily — can affect your credit score by:

— Increasing your credit utilization rate. “If an account is closed, your available credit goes down, and your utilization of credit goes up,” Klipa says. “This will hurt your score as how much you owe as a percentage of available credit is one of the largest contributors to score calculation.”

— Affecting the credit mix included in your report, especially if it’s your only credit card.

— Potentially decreasing the longevity of open credit accounts in your report.

Before you enter into an agreement with the company, you’ll want to find out about — and potentially negotiate — what might be reported to the credit bureaus. Also, be sure you know what you can and can’t handle as far as monthly and long-term payments.

“The worst thing for you to do is to enter into these programs with unrealistic expectations and then not be able to meet what you had originally agreed to do,” Schulz says.

Failure to successfully follow the hardship arrangement could result in a return to the original contract terms, including collection of fees associated with the recovery process, Klipa says.

[Read: Best Secured Credit Cards.]

Is Credit Counseling a Better Option?

For consumers who find it too intimidating to deal with a credit card company directly or have a situation that’s more complicated than just a problem with one card payment, the most likely next step would be to work with a credit counseling agency.

A consumer’s single hardship plan with a creditor doesn’t usually address circumstances beyond that relationship. But a comprehensive session at a credit counseling agency — such as at a nonprofit accredited by the NFCC — will factor in all expenses, accounts and debts, Klipa says.

It’s possible that the counselor will recommend a debt management plan, which involves a counselor conducting negotiations with multiple creditors on behalf of the consumer. Most people have more than one credit card, and managing multiple hardship programs can be overwhelming.

“Sometimes they are successful. Many times they are not and are faced with contacting multiple creditors and resolving each hardship individually,” Klipa says.

Debt management plans are completed 20 to 25 percent more often than individual hardship programs — according to NFCC statistics — because of the comprehensive services offered to each individual, Klipa says. “This is due to the combination of valuable advice, a comprehensive individualized review, and a single or multibank approved program that is matched to what an individual can afford,” he says.

More from U.S. News

Pros and Cons of Secured Credit Cards

A Complete List of Ways to Build Credit

4 Ways to Get a Low Interest Rate Credit Card

What You Should Know About Credit Card Hardship Programs originally appeared on usnews.com

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