When businesses first began closing their doors in response to the coronavirus pandemic in March 2020, many Americans were left wondering how they were going to pay rent, afford their mortgage, buy groceries, or keep the lights on, let alone pay off their credit card debt. No one knew when life would go back to normal; when businesses would reopen and entire industries could resume operating.
The uncertainty compelled many businesses, including the financial industry, to offer financial assistance to those experiencing economic hardship. According to the Consumer Financial Protection Bureau (CFPB), banks are offering financial assistance to consumers in four main ways:
- Lowering or deferring your monthly minimum payment
- Waiving or refunding late fees
- Reducing your interest rate
- Establishing a payment plan to pay off existing balances
One of the most attractive options has been to defer credit card payments.
What does it mean to defer credit card payments?
To defer payments doesn’t mean that the amount you owe is forgiven and forgotten nor does it mean you have to come up with the money immediately; think of it more like a time out. When you defer a payment, you are delaying the due date by an agreed-upon time and price.
Some creditors will defer payments for 30 days, others 60 to 90 days. Some creditors allow an individual to pay absolutely nothing during the deferral period, while others require minimum payments.
Even if your creditor agrees to defer your payments they could continue to charge you interest. In that case, if your balance is $10,000 with an interest rate of 20 percent at the time you start your 90-day deferment, you should expect your credit card balance to increase by more than $500 at the end of the 90 days.
The details are a little difficult to obtain because not all consumers will qualify, unfortunately, for a variety of reasons. If you don’t qualify for a deferred credit card payment, you’ll want to continue to make on-time payments, paying at least the minimum due on your credit card balance. Skipping the minimum payment could lead to a whole slew of other financial issues including a drop in your credit score, a “delinquent” status reported to the credit bureaus, incurring a late fee charge, an increase in your interest rate, and more.
Are creditors reporting negative information during the pandemic?
Both FICO and Vantage Score have publicly stated that consumers who enroll in forbearance or deferred payment plans will not see a penalization in their credit scores, but that lenders must notify the bureaus if a customer has been placed in one of these plans, according to a March 2020 report by the Consumer Data Industry Association. According to the association, these notifications ensure that enrolling in a financial assistance program did not ultimately hurt the consumers’ credit reports.
Rod Griffin is the Senior Director of Public Education and Advocacy at Experian, one of the three major credit bureaus that are taking steps to help consumers financially weather the pandemic. He urged consumers to check their credit report regularly during this time noting that the credit bureaus are providing free weekly access to your reports through April 2021 at AnnualCreditReport.com.
“Know what’s in that report,” Griffin says, because “credit history is going to be important as we move forward.” But don’t obsess about it, he says. Your priorities should be taking care of your family and your health, and then, if necessary, talking to lenders about how to protect your finances, Griffin said.
Is my creditor still offering financial assistance?
When financial assistance was first touted following the historic closures earlier this year, many of the assistance programs came with end dates. While rent moratoriums and mortgage assistance was forecasted to last through July 31, 2020, and student loans are deferred through September 30, 2020, deferred payments for credit cards was only expected to last two to three billing cycles.
So now that we’re four months or so into the physical distancing quarantine and Broadway has already announced it will not open until January 2021 at the earliest, what will creditors do to assist consumers who remain laid off or furloughed?
DebtWave Credit Counseling, Inc. contacted some of the most popular banks our customers use and asked that very question. What financial assistance is being offered to customers now? And do you plan to extend these financial assistance programs so long as the coronavirus continues to rage on?
Given that much of the COVID-19 financial assistance is being offered on a case-by-case basis, it’s best to contact your creditors directly to see what kind of financial assistance you qualify for. Many creditors have created COVID-19 specific landing pages. We’ve included links where appropriate. Additionally, here are some key questions the CFPB recommends you ask your creditors regarding coronavirus financial assistance programs:
- If I can’t make my payment as a result of the coronavirus pandemic, do you have a financial relief program?
- Are there fees associated with these options?
- If I’m able to defer or lower my monthly payments, will interest continue to accrue during this relief period?
- How long does the relief period last and when will I need to start repaying my bill?
- What happens if my financial situation hasn’t changed once the period ends? Is there an option to reevaluate?
- What information will be reported to the credit reporting agencies?
- Will I lose the ability to charge anything to my card if I enroll or request relief?
Of course, you can also contact a credit counseling provider like DebtWave Credit Counseling, Inc., and meet with one of our certified credit counselors for a complementary budget and credit analysis.
Creditors Offering COVID-19 Financial Assistance
American Express
Check out American Express’ Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Bank of America
In March 2020, Bank of America announced financial assistance offerings for its 66 million consumer and small business clients. Among the financial assistance offerings was the ability for card members to “request to defer payments, refunds on late fees.”
Bank of America has a webpage where customers can request payment deferrals. So far, Bank of America has provided about 2 million deferrals between March and June 30. Exactly how long the credit card deferral is offered appears to be on a case-by-case basis, but the company continues to provide them. “We are still offering our clients with payment forbearance on credit cards and loans as well waiving some fees,” a Bank of America spokesperson told DebtWave Credit Counseling, Inc.
Barclays
Check out Barclays’ Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Capital One
Check out Capital One’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Chase
Check out Chase’s Financial Relief Program for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Citi
Citi has extended its assistance programs for those impacted by COVID-19. Citi cardholders can request use forbearances, meaning payments could be missed for a period of time without penalties. “Credit cardmembers are eligible for a deferral of minimum payments for two months,” a spokesperson confirmed to DebtWave Credit Counseling, Inc.
The company first announced its “‘always on’ assistance programs for eligible credit card customers, including credit line increases and collection forbearance programs” in a news release in March. No end date has been determined and the company continues to assess the situation. “This is a rapidly evolving situation and we want our customers to know we are here to provide assistance should they need it,” said Anand Selva, CEO, U.S. Consumer Bank. “We continue to monitor developments closely and will evaluate additional actions to support our clients and communities as needs arise.
Discover
Check out Discover’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Goldman Sachs (Apple Card)
Apple Card users can enroll in the Financial Assistance Program for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
HSBC
Check out HSBC’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Navy Federal Credit Union
Check out Navy Federal’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
PNC Bank
Check out PNC’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Synchrony Bank
Check out Synchrony’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Truist
Check out Truist’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
USAA
Check out USAA’s Financial Relief Program website for more information on financial assistance available for those experiencing financial hardship due to coronavirus.
Wells Fargo
Wells Fargo currently offers payment assistance for cardholders impacted by COVID-19 financial hardships that ranged from one to three billing cycles, but now the company is offering two billing cycles of payment assistance, a spokesperson confirmed to DebtWave Credit Counseling, Inc.
This means that customers who previously received payment assistance due to COVID-19 financial hardship can currently extend their deferment period for two billing cycles. To qualify, a cardholder must have experienced financial hardship as a result of COVID-19. However, the Wells Fargo spokesperson noted that any Wells Fargo cardholder facing challenges making their credit card payments is encouraged to contact the company to discuss and determine additional options.
Credit Counselors as a Financial Resource
For many Americans, credit cards are one of the most important financial survival resources right now. Even those families and individuals who have come to rely on cash as a way to budget grocery spending, gas or other regular payments may have had to turn to plastic.
Particularly when money is tight, credit cards may serve as an important lifeline to afford basic needs. And in a climate when cash is no longer accepted by many businesses as a COVID-19 safety precaution, credit cards become even more critical.
If you’re unable to make your payments on time, credit card debt can add up quickly and result in longer-term financial challenges. If you are unable to make your credit card payment or think you might not be able to soon, notify your credit card company and contact a credit counseling agency like DebtWave to speak with one of our certified credit counselors.
Nonprofit credit counseling agencies like DebtWave regularly communicate with creditors and we can assist you in developing a financial plan that works for you. Rather than reach out to your issuers and negotiate separately with each one, says Pete Klipa, senior vice president of creditor relations at the National Foundation for Credit Counseling. “It does make a lot of sense to handle that in a holistic way with one call.”
We are living in very difficult times, as never before in our lifetime. Credit cards issuers ought to take the position of, first lower the interest they charge to debtors to half of what they charge now( why not? After all the FED has lowered to zero %) and second, forfeiting one third of the outstanding debt, and show it as a loss in their accounting which will eventually benefit their balance sheet and taxation. This is not a liberal motion but a conciencious understanding to keep clients alive financially and maintaining them. Once Covid-19 becomes under control, less traumatic , let’s say, a year from now, the banking sector will be in a different position to take measures alongside new reforms long overdue.