The past few years have affected every American to some degree when it comes to their finances. Even those who might have never struggled to meet their obligations might have found themselves facing lean budgets. Job losses, foreclosures and even divorces can drastically change the way we not only spend and save, but how we view money as a whole. Even credit card companies have reshifted their focus and goals, although they’re not widely publicized.
One of those shifts you might not be aware of is the growing number of credit card hardship programs offered by those same card companies. While they’ve always been around, it’s the way they’ve grown and evolved in recent years that struggling customers will find beneficial.
Credit Card Hardship Programs
Many of us have this image of these huge companies that are focused only on profits; and it’s true, their goal is to cover their own financial basis while keeping stockholders happy in the process. But these credit giants also know it’s their customers who ultimately bring their cause full circle. A recession or higher-than-average unemployment numbers affect those profits. At that point, they go into an entirely different mode. The worse thing a bank or other financial company can hear a customer say is, “I’m filing bankruptcy.” Enter the hardship program.
This type of program will help customers reshift the money owed. The late payments and interest are suspended while a consumer works on paying down the balance owed. The monthly payments will usually be significantly reduced. The goal is to at least keep payments coming in, even if they are lower than what was initially agreed upon. It keeps the customer from feeling as though bankruptcy is his only option and once that’s no longer on the table, the credit card company or bank can protect its investment as well. Their goal is to take some of the pressure off until the customer has a better handle on his finances and can return to making full payments once again.
What It’s Not
A hardship program is not designed for those who have shown irresponsible decision making behaviors, but rather, they’re focused more on those who have suffered a job loss, major illness or other life changing events.
A hardship program is also not the optional protection plans that are sometimes offered when you apply for a credit card or are approved for a loan. It doesn’t kick in and make the payments for you; it simply allows you to take a step back, while maintaining newly defined terms, so that you can regain financial footing. It’s an alternative to bankruptcy and the card companies hope this will prevent customers from ceasing payments altogether. It’s designed to be a “win-win,” so to speak.
Keep in Mind
While a hardship program is often welcome relief for a struggling consumer, it’s important to remember there are sacrifices the card holder will make. There’s a good chance the account will be suspended while in this mode. Some consumers even risk having their account permanently closed after having repaid the money. Also, this is designed to be a temporary solution; ultimately, the creditor wants the customer to return to the original agreement once the crisis has passed. Finally, there’s a good chance the hardship program will show up on the customer’s credit card.
This is a great way to keep from pulling in a third party to assist with financial difficulties. The consumer works out the agreement with the creditor.
A Final Word of Caution
The credit card companies – all of them – offer these programs. The problem is, they don’t advertise them. You’ll want to check your monthly statement for a phone number to call (you’ll probably end up with a customer service rep at first) and you’ll need to ensure you’re put in touch with the right person who can authorize a newly-negotiated agreement. Also, check the website. You might find what you need there, though you’ll still have to spend some time on the phone with the company. Be honest and if an offer extended is one you know you won’t be able to fulfill, keep negotiating. It defeats your purpose if you spend all that time hammering out a new agreement that you know isn’t realistic.