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Credit cards offer convenience, security, and rewards. Overspend with a credit card, however, and the interest and fees can bury you. Here are 10 tips to stop using credit cards.

stop using credit cards

If you’ve got a bad credit card habit, chances are you know it. Whether or not you’re willing to admit it is a whole other story. But admitting you have a problem is the first step to making changes.

If you can answer yes to any or all of these questions, you need some major changes:

  • Do you pay interest fees when you send in your credit card payment?
  • Have you ever paid your credit card late because you didn’t have the money for the payment?
  • Do you use your credit card when you don’t have enough cash?
  • When your issuer raises your credit limit, do you spend more because you can?

Credit card companies just love credit card users like this. They pay interest and late fees. They spend more on their credit cards, too.

This means credit card companies can charge merchants for more transactions. Altogether, these credit card users are the ones who are putting food on the table.

And putting more money in the pockets of credit card issuers means you’re putting less money in your own pocket. So the goal should be to stop these bad credit card habits. Instead, work to get to a place where you can use credit responsibly. This means taking advantage of rewards programs but never paying interest or fees.

Don’t think you can do it? Think again. Take these ten steps to systematically break your bad credit card habits.

1. Look at your spending carefully

Deep down, maybe you know your credit card habits have come about because you’re spending more than you earn. And this is a self-perpetuating issue. Once you get stuck in the cycle of paying interest and fees, it becomes harder and harder to get back to spending less than you earn.

So your first step is to track your spending faithfully. You can do this on a pen and paper. Or an Excel spreadsheet. Or you can use a program like Mint.com that will automatically import your transactions.

The key here is to total up all of your spending from all sources–credit cards, checking account, savings, and cash. Keep this up for at least a month, and you’ll see where you’re spending money you shouldn’t spend. Keep it up for multiple months in a row, and you’re likely to find that you automatically reduce your spending.

2. Create a new budget

Once you’ve tracked your budget for a month or two, you can see what you are spending versus what you should be spending. Now it’s time to actually create a new budget. This budget should be based on the money you actually make each month.

Again, you can do this in different ways. You can stick to cash-only spending. Or you can use a program like Mint to track where you stand in various budget categories. Either way, you’ll need to use discipline to make sure you stick to your budget. The best way to do this is to cut back on spending slowly, particularly in essential areas like groceries.

Try to take your grocery spending from $500 per month to $200 per month overnight, and you’ll probably fail. But you can succeed by cutting just $20 per week from your spending. Keep doing this until you reach a comfortable, but frugal, level of grocery spending.

You can do this with other areas of your budget, too. The key is simply to budget for what you need and then stick to the budget. This will be more possible if you consistently check in on your spending. Make this a habit, and you’ll find you’re more likely to stick to your budget.

3. Build an emergency fund

This step can take some time, especially if you’re in the habit of overspending rather than saving. But find places where you can stash back even $10 per week. Over time, you’ll build up a pad of savings that can help you in an emergency.

Start by opening a high-yield savings account. Then, begin with the first goal of putting about $1,000 into the emergency fund. Sure, you’ll eventually want to save three to six months’ worth of expenses. But this can take a really long time. Starting with this smaller goal lets you be prepared for minor emergencies, which can help you cut back on credit card spending.

Remember: an emergency fund is to be used in true emergencies only. This doesn’t take the place of your credit card. The purpose of the emergency fund is to remain untouched for regular expenses but accesible when major spending is required. Some examples might be the loss of a job or a significant medical expense.

For more details, see Five Components of an Emergency Plan, but ignore component number four.

4. Stop using your credit cards

Building up an emergency fund is essential for this step to start working. If you’ve consistently used your credit card for minor emergencies, you’re relying on it too much. When you have a bit of money in savings, you can reduce your credit card dependency. And this can let you stop using your credit cards.

Now that you’re living on a budget, you should not need to rely on your credit cards anymore. Instead, you should only be spending the money that actually comes into your bank account each month.

So stop using your credit cards. You might want to take baby steps here. Start by simply leaving the cards at home all the time. Then remove them from your PayPal account and other automatic online payment options. Then, start shredding them, which will lead you to the next step.

5. Destroy your credit cards except for one or two

You can play this one of two ways. If you’re disciplined enough, you can simply destroy the physical credit cards and remove them from your online accounts. This means you’ll stop spending on the cards but won’t actually close the accounts. This is because closing old credit card accounts can actually damage your credit score.

But if you have a serious problem, this may not be enough to stop your overspending. Instead, you may need to go as far as actually closing your credit card accounts. Overspending, after all, is a larger issue than getting a better rate on your next mortgage. So if you want to really take away your ability to overspend on credit, you can close the accounts.

However, you’ll only be able to close accounts that have no outstanding balance. You may want to skip to step seven if all of your cards have an outstanding balance.

6. Lock away your remaining credit card

Now that you have one credit card left, realize that you will not be using this card for everyday spending; for now, cash is king. Put your remaining credit card out of sight. Lock it away. I’ve even heard of some people who put their credit card into a cup of water in the freezer. The extra step of breaking a block of ice to get to your credit may be an extra demotivator.

Why keep a credit card at all? You may need it in a real emergency before you emergency fund is fully built up. But making it difficult to access will mean you’re less likely to use it for non-emergencies.

7. Consolidate your balances onto one or two cards

Gather the latest statements for the cards containing balances. Choose one or two with the lowest interest rates, and consolidate your balances onto these cards. By calling the credit card company, you can provide the information for your other cards with balances. Then they will initiate a balance transfer. Ask for a transfer fee waiver. If they aren’t willing to waive the balance transfer fee, consider using a different card to consolidate your balance or apply for a great balance transfer credit card.

Another option is to look at an unsecured personal loan to consolidate your balances. This type of loan can get you into a lower interest rate and help you pay off your credit card debt more quickly. Plus, once you’ve consolidated debt off of some of your cards, you can then close those zero-balance accounts.

What if you don’t have good enough credit or enough available credit to consolidate your debt? In this case, you’ll need to skip to steps eight and nine. You can make this work without consolidation. Consolidation can just make it easier.

8. Enact a cash-only policy

Once you’ve lived without your credit cards on hand for a couple of months, your budget should be in a good place. Now you know what you can and need to spend each month. So now you can enact a cash-only policy.

This doesn’t necessarily mean you have to spend physical cash. But that can be a good idea. Spending cash actually helps you spend less money. But spending cash can also be unwieldy at times. So another option is to keep cash on-hand for certain expenses, such as groceries, but to use your debit card for other expenses.

The key is that you have to actually have the money in hand–either physically or in your bank account–to spend it. Getting into the swing of this can be difficult. But, trust me, it’s worth the learning curve. Once you start spending only what’s coming in, you can turn your attention to spending less than what you make. And this is how you’ll really start to make financial progress.

9. Pay down your balances

Now it’s time to start reversing the damage you’ve done with your bad credit card habits. You’ll likely need to pay more than the minimum payments on your accounts to start getting out of debt. So use that money that you’ve suddenly found in your now-strict budget to get this done.

There are a couple of different ways to pay down your balances. And, really, either one is sufficient, as long as you keep on keeping on. One option is the Debt Snowball method popularized by Dave Ramsey. This has you start paying off your smallest balance first. Once that balance is paid off, apply its minimum payment and any extra money to the next-smallest balance.

The advantage of the Debt Snowball is that you get some quick wins up front. This can help you stay on track as you work towards paying off larger and larger balances.

The other option is the Debt Avalanche. This has you start with the highest-interest account first. Then pay off lower-interest cards as you move through your debts. The advantage of this approach is that you wind up paying less interest over time.

The Debt Avalanche is the most logical way to pay off your debts. But it doesn’t make a huge difference unless you’re in a lot of debt or have a big differential between your interest rates.

You can check out a more in-depth discussion of these two options here. But, really, the main issue is that you start paying off your debts and keep on with it until your credit cards are paid off.

10. Check your progress each month

Paying off debt takes time and dedication. You’ll need to keep moving forward towards your goals, even when things get tough. One way to keep making progress is to see how far you’ve come.

The best option is to come up with a way to consistently track your balances each month. You’re already checking in on your spending frequently, right? Well, make a chart where you keep track of your credit card balances month after month, and watch as they disappear.

You can do this with some budget-tracking softwares, such as Mint. Or you can create your own spreadsheet for tracking your credit card balances. Either way, be sure you’re checking in at least once a month to keep track of your progress. Seeing how far you’ve come will help you keep moving forward until you finally break your bad credit card habits and reverse the damage they’ve done.

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Enjoy free travel with this list of the best travel rewards credit cards of 2018. I’ve personally used several of these credit cards for free flights and hotel stays.

best travel rewards credit cards

It’s time to plan your holiday travel. That may mean cashing in the travel rewards you’ve accumulated on credit cards–or it may mean starting to use a travel rewards credit card. Chances are you spend money on some necessities, and when you do, tailoring the rewards you receive to your travel needs could end up financially benefiting you and your family even more than a cash back credit card might. Keep in mind, of course, that increasing your spending just to earn rewards doesn’t make sense, and it would be worse if you had to pay interest on your balances.

When you have controlled spending that you can afford, and you pay your credit card bill in full and on time every month, you can offset your costs of travel by earning rewards. Using the travel rewards credit card that best matches your travel needs for the spending you would be doing anyway could save you hundreds or thousands of dollars over the course of a lifetime. For example, some cards offer free flights and hotels while others can soften the blow of foreign transaction fees.

Listed below are the best travel rewards credit cards available today. If you’ve got a card you think deserves to be on this list, let us know and we’ll add it. These offers are subject to change so be sure to check the issuers application page and website for the most current information.

Editor’s Pick

Capital One® Venture® Rewards Credit Card

Capital One Venture Rewards Credit CardThe Capital One® Venture® Rewards Credit Card is one of the best travel rewards credit cards available today, as evidenced by the current offering:

  • Enjoy a one-time bonus of 40,000 miles once you spend $3,000 on purchases within the first three months, equal to $400 in travel
  • Earn unlimited 2X miles per dollar on every purchase, every day
  • Fly any airline, stay at any hotel, anytime
  • Travel when you want with no blackout dates

Plus, miles don’t expire and there’s no limit to how many you can earn. The Capital One® Venture® Rewards Credit Card also has:

  • No foreign transaction fees
  • $0 introductory annual fee for the first year; $59 after that

From our perspective, not being charged the typical 1% to 3% foreign transaction fee can be a great benefit all on its own if you spend money on purchases outside the U.S.

Learn more about this card and other travel credit cards here.

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List of the Best Travel Reward Credit Card Offers

In addition to the Editor’s Pick, here are some additional top choices.

Starwood Preferred Guest® Credit Card from American Express

Starwood Preferred Guest American ExpressThe Starwood Preferred Guest® Credit Card from American Express continues to be one of the best travel reward credit cards you can find. You can earn 25,000 bonus Starpoints® after you use your new Card to make $3,000 in purchases within the first three months. That’s enough for a few nights at a category two or three hotel (or one night at a category four hotel if you’re thrifty)

With this card you can earn up to five Starpoints for every dollar of eligible purchases charged directly at hotels and resorts participating in the Starwood Preferred Guest® program–that’s two Starpoints for which you may be eligible as a Card Member in addition to the two or three Starpoints for which you may be eligible as an SPG member. Earn one Starpoint for all other purchases. When redeeming your points, you can select from over 1,200 hotels and resorts in nearly 100 countries with no blackout dates. As a new perk, they have added free in-room, premium Internet access. Booking requirements apply and some hotels may have mandatory service and resort charges.

The Starwood Preferred Guest® Credit Card from American Express has a $0 introductory annual fee for the first year, $95 thereafter.

Learn more about this card and other travel credit cards here.

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Chase Sapphire Preferred Card

When this travel card hit the market years ago, it forced every issuer to do better. The Chase Sapphire Preferred Card includes a 50,000 point bonus after spending $4,000 in the first three months of card ownership. Those 50,000 points are good for $500 in cash value (like a statement credit, or gift cards) OR $625 in travel value. When you use your points to book though the Chase Ultimate Rewards portal, they’re worth 25% more. I own the big brother of this card (Sapphire Reserve) and those points are actually worth 50% more.

The process for redeeming and booking travel through Chase is just as easy as it is with sites like Travelocity or Expedia. All cardholders will earn 2x points on travel and dining purchases with 1x points earned on all other purchases. There are no foreign transactions fees to own the Chase Sapphire Preferred Card but there is a $95 annual fee. That fee is waived during the first year of membership.

You can also earn an additional 5,000 bonus points after adding an authorized user that makes a purchase inside of the first three months.

Learn more about this card and other travel credit cards here.


Chase Sapphire Reserve Card

The Chase Sapphire Reserve card is one of the highest level cards Chase has to offer. Yes, it comes with a $450 annual fee (and $75 annual fee for added cardholders) but the immediate benefits almost reduce that annual fee to nothing, making the card extremely attractive.

To open up, this card offers 50,000 bonus points after spending $4,000 in the first three months of card ownership. Those points are good for $500 in cash or $750 in travel. Points are worth 50% more when you use them to book through Chase Ultimate Rewards and the process is a snap. 3x points are earned on all travel purchases, all restaurant purchases and 1x points are earned on everything else.

Consider if you spend $5,000 at Restaurants every year. You’ll earn 15,000 points with this card which can then be used for $225 in travel. Effectively, that would make this a 4.5% rewards rebate credit card. But there’s more.

Every year, you’ll receive a $300 travel credit against any travel purchases you make. So if you use this card to purchase airfare, book a hotel, or rent a car the first $300 annually will be refunded. In addition, you will receive a $100 application fee credit for Global Entry or TSA Pre Check. Signing up for that program can help you avoid the long TSA lines if you’re always in a rush to make your flight.

The Chase Sapphire Reserve does not charge foreign transaction fees and includes elite travel benefits like world class travel protection and access to over 1,000 airport lounges across the world. Keep in mind however, there is a hefty $450 annual fee.

Learn more about this card and other travel credit card here.


Barclaycard Arrival Plus® World Elite Mastercard®

Another card with an excellent up front bonus, the Barclaycard Arrival Plus® World Elite Mastercard® starts off with a 40,000 mile bonus after spending $3,000 in the first 90 days. The 40,000 point bonus is worth a $400 statement credit. All purchases earn double miles with no spending limits or tiers to worry about and when you redeem your miles with Barclaycard, you earn a 5% miles back bonus. For example, if you redeem 100,000 miles, you’ll earn a 5,000 miles bonus.

Unlike many other travel cards the Barclaycard Arrival Plus® World Elite Mastercard® offers a 0% intro APR on balance transfers for 12 months. A complimentary FICO score is included and there is no foreign transaction fee charged for purchases made abroad.

This card does have an $89 annual fee, which is waived for all first year cardholders.

Learn more about this card and other travel credit cards here.

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Capital One® VentureOne® Rewards Credit Card

For those who hate to pay an annual fee on a credit card, the Capital One® VentureOne® Rewards Credit Card is a slightly watered down version of the Venture card above. The opening bonus is 20,000 miles after spending $1,000 in the first three months and the everyday rewards program 1.25 miles per dollar spent on everything.

One of the big benefits is 12 months of interest free purchases. Included is a 0% intro APR for 12 months on purchases and after that, the card transitions to a variable interest rate. There are no foreign transaction fees and no blackout dates for flights or hotels. Fly any airline, stay in any hotel. Miles never expire for the life of the account.

There is no annual fee to own the Capital One® VentureOne® Rewards Credit Card

Learn more about this card and other travel credit cards here.

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The Platinum Card® from American Express

New cardmembers of the The Platinum Card® from American Express can earn 60,000 Membership Rewards Points after spending $5,000 in the first three months. This is where the fun just begins.

Every year, you’ll also receive a $200 airline fee credit. This includes checked baggage, meals, in flight Wi-fi or a variety of other fees. If you ride with Uber, you’ll be provided $15 in Uber credits every month and a $20 Uber credit in December, for a total of $200 in annual credits. Yet another fee refund comes in the form of $100 for admission into Global Entry or TSA Pre Check. This statement credit is provided every four years.

When making purchases through American Express Travel (either for airfare or hotels), five points per dollar spent are earned. Single points per dollar spent are earned on everything else. Please remember that this is a CHARGE card, not a credit card. So all purchases must be paid in full every month to keep the account in good standing. This is literally the last card in the world you wan’t to roll interest over with month to month.

Perhaps the most glamorous part of being a Platinum Card® from American Express member are the perks. Too many to name but some of the highlights:

  • Platinum Concierge service available 24/7/365
  • RSVP to invitation only events
  • iPhone purchase protection
  • Preferred seating at events
  • Advance dining reservations
  • Access to over 1,000 airport lounges
  • No foreign transaction fees

No credit card can compare with the benefits that the Platinum Card from American Express can provide. And it’s not close. But in order to earn these rewards and perks, you must be willing to pony up a $550 annual fee.

Learn more about this card and other travel credit cards here.

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Discover it® Miles–Unlimited 1.5x Rewards

Discover it MilesThe Discover it® Miles–Unlimited 1.5x Rewards Card is a true 1.5% rewards card. In addition, Discover will match all of your rewards at the end of the first year, making it a 3% rewards card the first year. On top of that, there is no annual fee. Additional benefits include the following:

  • Get free access to your FICO score
  • Redeem your rewards in any amount for cash or a travel credit.
  • 100% U.S. based customer service.

Learn more about this card and other travel credit cards here.

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More Options: You can see more travel rewards credit cards here.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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In our 2018 Capital One Venture Rewards credit card review, we look at its 50,000 mile bonus and 2x rewards structure. Is it too good to be true?

Capital One Venture Rewards credit card review

I use four primary credit cards to buy just about everything. One for my purchases at the grocery store. One for purchases at the pump. Another to make all of my travel purchases (flights, hotels, etc.) and finally, a card for everything else. Yet when I look into my wallet, I see 11 credit cards. Why so many?!

Sometimes an offer is simply too good to pass up. One of the credit cards I signed up for earlier this year is the Capital One® Venture® Rewards Credit Card. Right now, this card offers a 50,000 mile bonus for meeting a small spend hurdle, in addition to other benefits which make it very attractive. Let’s dive into the details and see whether or not this should be one of the 11 cards you find in your wallet!

Capital One® Venture® Rewards Credit Card 50,000 Mile Bonus

Capital One Venture Rewards Credit CardWhen you sign up for a Capital One® Venture® Rewards Credit Card, you stand to earn a 50,000 mile bonus. To receive that bonus, you must spend $3,000 in the first three months of card ownership. Those 50,000 miles equal $500 in travel. And you can fly any airline or stay in any hotel, anytime you want.

Spending $3,000 on a credit card in three months may sound like a lot of money. But when you consider all the things you can use a credit card to pay for, it’s not all that challenging. As a homeowner (and an automobile owner), I can use my credit card to pay for gas, groceries, insurance, and a variety of other household and life necessities. Between groceries, gas, and auto insurance, I’m already at $1,000 a month. Over the course of three months, I would meet that bonus threshold.

If you have received this bonus from Capital One in the past (for owning the Capital One® Venture® Rewards Credit Card), you are not eligible to receive this one.

Travel Rewards Program

There’s not much to be said about the travel rewards program. Every dollar you spend with the Capital One® Venture® Rewards Credit Card is worth 2 miles. That’s it. No caps, limits, hurdles, or rules to follow other than double miles for everything, always.

Miles do not expire for the life of the account (open or closed), and there are no blackout dates to speak of. When using your points to book a flight or hotel, every options is available to you. Consider your points as good as cash–no restrictions.

Venture Rewards APR and Fees

Unfortunately, there’s no intro APR with this credit card. The standard purchase and balance transfer APR is 13.99% – 23.99% variable. The APR for cash advances is also 23.99% (with a 3% cash advance fee), and there are a couple of fees to keep your eye on.

  • Up to a $35 late payment fee
  • $95 annual fee ($0 annual fee for the first year).

The annual fee of $95 is average for a quality travel rewards credit card. In fact, when you compare vs. that of Chase, Citi, and American Express–$95 seems to be the agreed-upon industry standard.

One added pricing perk of the Capital One® Venture® Rewards Credit Card is that there are no foreign transaction fees. A foreign transaction fee is charged by some issuers when you use your credit card to make international purchases. The issuer must first convert your US dollars into the local currency, then offer those funds to the merchant. Capital One offers this service, free of charge, for their full line of credit card products.

Visa Signature Benefits and Perks

Included with the Capital One® Venture® Rewards Credit Card are Visa Signature perks. While the card issuer provides the rewards program and the bonus, it’s the processor that steps up the benefits an extra level. You can expect to receive the following:

  • Complimentary Concierge Service–If you need ANYTHING, you can give Visa Concierge a call and they will assist you. Help with changing a reservation; a flat tire; concert tickets–whatever. You’ll have a 24-hour hotline to secure the things you need.
  • Auto Rental Damage Collision Waiver Coverage–If you’ve ever rented a car, you know that there’s a damage insurance waiver you’re always asked to sign. In the event the car you rent is damaged, you might be liable for out of pocket expenses if you’re not properly insured. So long as you book with your Capital One® Venture® Rewards Credit Card and rent a standard vehicle (check the terms), you’re always covered for damage.
  • Extended Warranties–After making a purchase, you may qualify for an extended warranty of up to one year. Depending on the length of warranty you already received from the manufacturer, Visa is willing to up it between three months and one year.
  • Shopping Discounts–When you shop at select online merchants, you’ll earn a discount.

Is This Travel Card Right for You?

So I opened this review by telling you the Capital One® Venture® Rewards Credit Card was one of the 11 cards currently in my wallet. But I also want to let you know that as of today, I rarely use it for purchases (if ever). That’s not because this isn’t a great credit card, but because I rarely travel. So it’s easier for me to use my Citi Double Cash Card and earn the 2% cash back, then earn miles.

The bonus is attractive enough where just about anyone can take advantage of 50,000 bonus miles. If you currently don’t own a travel rewards credit card and find yourself making airline and hotel reservations frequently, this card has a lot to offer. And with no annual fee for the first year, you have nothing to lose but a few points on your credit score.

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A credit card hardship program can help you deal with mounting credit card debt. This guide walks you through these programs, including what they are, how they work, how to apply, and their effect on your credit score.

credit card hardship program

No matter how particular you are with your budget, life can always knock everything off-kilter. Illness, injury, job loss… all of these have the ability to impact your monthly income. This makes it difficult to meet your financial obligations, including minimum credit card payments.

So, what can you do when credit card bills keep coming but you’re having trouble making payments? This is where a credit card hardship program can come into play.

What It Is

Some credit card companies make hardship programs available to their customers in times of need. These programs allow you to temporarily reduce monthly payments to a manageable level if you are having trouble paying your bills due to unforeseen circumstances.

Credit card hardship programs typically last somewhere between six months and a year. They don’t allow you to bypass monthly payments altogether. But they will often involve a lowered interest rate, altered repayment plan, or a combination of the two. Some companies will even offer to waive certain fees for late payments, over-limit charges, and the like.

So, why would credit card companies even offer these types of programs? Well, at the end of the day, it’s really a mutually-beneficial relationship. The consumer is able to continue managing their debt. This means they avoid defaulting on the account. The company will continue receiving a monthly payment, even if it’s a smaller one. And it doesn’t have to worry about chasing the customer down, sending the account to collections, or even charging off the debt.

Who It’s For

If you are struggling to make your credit card payments each month and have some sort of hardship going on in your life, you may be eligible to enroll in this type of program. Eligible hardships could include situations such as:

  • A serious illness or injury
  • A death in the family
  • Divorce
  • Losing your job
  • Being affected by a natural disaster

If you feel your circumstance is compelling enough to warrant enrollment, give the company a call. But don’t simply contact them with woes of accidentally overspending this month. These programs are meant to be a last resort for those who have tried every possible way to make their payments on time.

Of course, a hardship program shouldn’t be your first option for managing monthly expenses. In fact, it’s far-from-ideal. We’ll talk more about the impacts in just a moment.

If you’ve exhausted all other avenues, though, including cutting your monthly expenses and implementing a bare bones budget, a credit card hardship program could be next on your list.

Before Enrolling

If you are thinking about enrolling in a hardship program, it’s important to have a come-to-Jesus moment with your finances first. And you’ll want to do it before you get behind on payments.

Sit down and look at your situation. How much are you obligated to pay each month? How much are you realistically able to afford at the moment, due to the situation at-hand? Could you do more to trim expenses to a more manageable level each month?

Ask yourself whether there is an end in sight to your hardship. If you recently lost your job, can you reasonably speculate that you will indeed find a suitable replacement at some point, bringing relief to your financial crisis?

If your struggle is due to an illness or injury, do you expect another source of income to arrive in the future? Perhaps you are applying for Social Security Disability or other needs-based programs. In that case, you can estimate a timeline for your financial hardship.

Once you have a good idea of where you stand (and how long it will continue), you can lay out your situation to the credit card company. This way, you’ll know how much you can realistically offer to pay through a hardship program.

How to Enroll

These types of programs are far from advertised, so you will have to work at it if you want more information. After all, credit card companies aren’t keen on telling customers that there are ways to not pay their full bill each month.

Chances are, the average customer service representative won’t be able to give you all the information you need, if they know about the program at all. Call customer service and ask to speak with someone in the customer hardship department or a customer assistance representative. You may be able to look on the credit card company’s website to find a directory of departments, as well.

When you call, explain that you would like more information on any available hardship programs. Don’t immediately dive into your story or tell the company that you “can’t afford to pay your bills.” That will raise some serious red flags and could prompt the company to lower your limit or make other credit-impacting changes. Instead, simply ask for information and see what the representative offers.

They will likely ask what your situation is that warrants enrollment in such a program. This is the uncomfortable part. You’ll need to give them a rundown of what’s going on in your life and why you are suddenly unable to pay your bills in full.

While you do need to make your case for hardship eligibility, be sure to still keep some of your cards close to the chest. Give the basic facts about your situation, but let the representative do most of the talking. That way, you can hear a solid, neutral overview of the program and how it would look.

Then, once you’ve gotten the specifics about the program – the duration, how it works, your new interest rate, what the approval process is – it’s time to hash out what you’ll actually pay.

The Terms

At this point, the representative will likely ask you what you can reasonably afford each month. This is where your previous calculations will come into play. Let them know that you’ve crunched the numbers and believe that you can successfully manage XYZ payments.

No, the company may not accept your offer as it stands. However, crunching the numbers beforehand allows you to know how far off their proposed payment schedule may be from your bottom line.

The most important thing to remember here is to be cautious of what you say. For example, don’t propose a payment schedule that you aren’t sure you’re able to pay for the duration of the agreement.

As mentioned, also don’t zero in on a flat-out “inability” to pay on your debt. This can spook the credit card company. In turn, they could lock your card, limit your access to the account, or even drop your credit limit without notice. You don’t want to add insult to injury by negatively impacting your credit in additional ways.

Will a Hardship Program Hurt My Credit?

While we’re on the subject, let’s talk about how a credit card hardship program will impact your credit in the end.

Every credit card company approaches a hardship arrangement differently. It’s important to ask exactly how your creditor plans to report your enrollment in the program, if they report it at all. If possible, get a copy of this policy in writing before you move forward.

Some companies will report your account negatively to the bureaus, even though you’re paying each month. This can include notations such as “paying partial payment agreement” or that the account balance is “settled.” Neither of these will help your credit score. In fact, they may set up red flags for lenders in the future.

Also, many creditors require you to close the existing account in order to move forward with a hardship agreement. You won’t be able to make new charges on the card, of course, but this will also impact your credit report.

Closing an account will negatively affect your average age of accounts and total credit limit. They should typically be avoided. But in this case, you may have to grin and bear it. However, be sure to ask how the closed account is notated.

Will they report your account as “closed by consumer” to the bureaus? If so, you’re good to go. However, if they report it as “closed by creditor,” you’re looking at another negative impact that may not be worth it to you in the end.

Moving Forward

Deciding whether or not to enroll in a hardship program is, in the end, contingent on your exact situation. Are you feeling an uncomfortable pinch due to your unforeseen circumstances, or are you truly at the end of your financial rope and in need of a life raft?

If the former, it might be worth looking into other ways to put more wiggle room into your budget. This may include a 0% balance transfer offer, a short-term personal loan from family, or even just cutting all unnecessary expenses for a while.

If you’re truly in dire straits, though, a hardship program can save you from defaulting on your debt. Be sure to seek out as much information as you can about the program beforehand, and get it in writing if possible. Figure out what you can actually afford each month before making your offer to the creditor, and then be sure to keep up with those payments.

Before you know it, you’ll have paid off your debts and (hopefully) your hardship situation will have improved.

Have you ever considered–or enrolled in–a credit card hardship program? What was your experience?

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