What are credit card hardship programs and how do I know if I’m eligible?

Financial issues happen to the best of us. Even if you’ve never missed a credit card payment before, you might fall behind if you lose your job, get sick or have a big expense pop up. A few missed payments can quickly bring headaches when the late fees and higher interest rates kick in. Good news: Many credit card issuers have hardship programs aimed at people who are struggling to pay their credit card debts. Here’s what they are and how to know if you’re eligible.

What’s a credit card hardship program?

Credit card hardship programs are payment plans offered by almost every major credit card issuer (Capital One, Citi, Bank of America, American Express, etc.) With these programs, a creditor might agree to lower your minimum payment and your interest rate, or waive fees and penalties. 

Typically, hardship programs are temporary, lasting anywhere from three to 12 months. But many creditors also offer long-term plans (some that last as long as five years) that are meant to allow you to repay your entire debt.

Before you contact your credit card company about its hardship program, take a good look at your finances. Figure out how much you can afford to pay toward your debt each month and how much help you need to stay current. You want to make sure a hardship program will actually help you manage your debt and not just delay your next missed payment.  

Related article: How to negotiate credit card debt settlement by yourself

If you don’t feel comfortable dealing with credit card companies on your own, or you’re not having luck convincing your creditors to enroll you in a hardship program, you could also can consider a debt management plan, where a credit counselor negotiates with your creditors on your behalf. These companies have successfully worked with credit card banks for decades in order to reduce monthly payments by getting creditors to reduce your interest rates to less than 10% (often significantly less).

Related article: How to find the right debt management plan (DMP)

Who is eligible for a hardship program?

Credit card issuers don’t just hand out hardship plans willy-nilly, of course. You’ll need to show that you have a good reason why you’re struggling to pay your bills. Some common reasons might include:

• a job loss
• significant income reduction
• a divorce
• a  serious illness or injury
• a natural disaster

To prove your situation, you might have to agree to provide documentation or meet with a credit counselor. Most credit card companies also won’t agree to a hardship program until you’ve missed at least one payment, says Michael Bovee, Resolve co-founder and debt relief expert. 

“They need to see evidence of a problem,” Bovee says. “As soon as you fall behind, give them a call.” 

If you can swing it, the best time to ask about a hardship program, Bovee says, is a few days after you’ve missed your payment, but before your bill is 30 days overdue. The 30-day mark is when your creditor will report your account as delinquent to the credit reporting agencies and your credit score takes a big hit. If you can get a hardship plan in place before then, you may be able to avoid dinging your credit score.

How do you enroll?

Credit card issuers don’t always publicize their hardship programs very well. As a first contact, call the number on the back of your credit card or any customer service number you can find. Explain that you’re having trouble keeping up with your bills and you’re looking for some help.

Once you get a contact who can help you, be very honest about why you’ve missed a payment (or more than one). Maybe you lost your job or had an unexpected hospital stay. You need to explain what’s changed for you that caused you to miss a payment, Bovee says. If there’s a specific amount you can afford to pay toward your debt each month, you can mention that, too.

If your creditor agrees to enroll you in a hardship program, keep in mind that they might lower your credit limit, freeze your credit card during the length of the hardship program or even close your account. Before you enter into a hardship program, it’s a good idea to ask what will happen with your account.

What happens next

Once you enter into a hardship plan, you’ll be responsible for repaying your debt as agreed. Even if you miss just one payment, you’ll likely lose the benefits of the hardship plan. That’s why you should only agree to a plan that works for you financially. 

In the long run, if you’re able to stick to the program, it should be good for your credit score. That’s because it could prevent you from missing any more payments and let you establish a good track record of paying your bills on time.