Coronavirus (COVID-19) has put us all on edge. Credit cards are a key tool for those hit hard by the financial crisis. Banks and credit card issuers are creating new guidelines and assistance programs for those who may find themselves temporarily short of what they need to pay their bills.
Here are some do’s and don’ts when it comes to your credit if you’re concerned about how to handle mounting bills.
Do ask your issuer for temporary relief
“The very first thing people can do is be proactive in the way they communicate with their creditors,” says Bruce McClary, vice president of communications and spokesperson at the National Foundation for Credit Counseling. “Reach out and ask what programs are available.”
Several major issuers including Capital One, Chase, Citibank and U.S. Bank have dedicated pages on their websites offering the most up-to-date information about the type of help they may be able to provide. Those who qualify may be able to get fee waivers, reduced interest or begin a collection forbearance program.
Don’t assume you can skip a payment
Just because many banks have pledged to take actions to help those facing uncertain financial circumstances doesn’t mean you can just go ahead and skip or miss a payment. The unilateral recommendation in statements put out by major issuers is to call the number on the back of your card and work out what would be best for your particular circumstances. If you don’t have an agreement in place and you don’t pay your bill, your credit score will take a hit. (Here’s what really happens when you don’t pay your credit card bill.)
Do ask for an increase on your credit limit
If it’s going to temporarily help you if you’re in a cash crunch — e.g. if you need additional spending power to stock up on essential items — call your lender and request a credit line increase.
Don’t panic spend and hit the spending limit on your card
It can seem like a good idea to buy a year’s supply of paper products now while they’re flying off the shelves, but remember: The more you charge on your card, the harder it will be to get out of debt if your immediate financial future is uncertain. Maxing out your card will also affect your overall credit standing because your credit utilization, a major factor in calculating your score, will be impacted.
Do consider a balance transfer card
If your credit is in good standing and you qualify, signing up for a card with a 0% APR offer can temporarily ease the burden of carrying debt. There are multiple cards out there offering interest-free periods ranging anywhere from 12 months to nearly two years. (Here’s what you need to know about 0% APR deals.)
