What Should I Do If I Can’t Make Credit Card Payments?
There’s nothing more stressful than realizing you won’t be able to make a payment on a bill. Whether you’re struggling to pay rent, or you fear your electric or cable going to get shut off, this financial struggle might be the only thing on your mind. You might have all of these utilities under control, but those aren’t the only things that we have to worry about in terms of our financials.
If you are frantically asking yourself, “What should I do if I can’t make my credit card payment?” Don’t stress too much; you have options. Your best option is to contact your credit card company directly. This is a common situation, and they will have options in place for you to make sure that you don’t fall too off track. If you have a credit card with a large company, like Discover, Capital One, or any personal bank, they are prepared for things like this. You are not the first person to have this struggle!
You have more than one option as well. If you do contact your bank or creditor and discover that their payment plans aren’t working out for you, there are still other things that you can do. Having a financial struggle seems like it is the end of the world, but we can assure that this is absolutely not the case. What’s more important above everything else is that you take action and don’t let your financial struggles become even further behind.
The First Steps to Take
More people think credit card debt is scarier than snakes when asked about their financial views in a recent survey (Wallet Hub, 2019). In this great big world we live in, money can seem so disconnected from reality, but unfortunately, it’s one of the main reasons for stress.
It’s important before coming up with your plan of action to first reduce your stress over the situation. You will have some financial struggles, but you will be OK. Too much stress can lead to impulsive decisions, like taking out more loans to pay it off or, in extreme cases, getting excess money in illegal or immoral ways.
Let’s help you come up with a plan of action before taking any of these drastic measures. These are the steps you will want to take initially:
- Contact your card company directly
- Try to make at least some payment – even if it’s just $5
- Create a financial plan to get back on track
- Come up with a plan to tackle the debt altogether
Before taking any other action, remember that you just have to pay the minimum monthly amount on your credit card. If you are used to paying $100 monthly and can’t afford that much this month, try making the minimum payment first.
You might be paying $100 monthly when really the minimum payment is only $25. It’s great to be ahead of your debt, and making only the minimum payment can keep you trapped in debt for too long. However, some months you might just have to make the decision to pay a little less than usual.
If you can’t do this, then try to come up with at least the monthly interest charges, especially if your card is entirely maxed out. For example, this might be what your current debt is at:
| Debt Amount | $750 |
| Minimum Payment | $35 |
| Average Monthly Interest | $21 |
What you would then want to do is get in contact with your debtor and do your best to make that $21 payment if $35 is too much. Use this chart to determine what the bare minimum you should try to pay is. If your card is maxed out and no payment is made, that means that you will end up having a balance of $771. This would be over the credit line which can have its own effects on your overall score.
If you can’t make that minimum interest payment, then don’t fear, you still have options. The worst thing that you could do is ignore your credit card company altogether. You want to have that communication so that they know that even though you can’t make a payment, you still want to stay on top of the debt. Most will even have a way to chat online, so you don’t have to carry anxiety over discussing the debt with someone in person.
Every creditor is different, and your payment plans are going to be based around your income or financial situation at the time. Get in contact with an agent, and they will tell you what options you have for paying this debt off. They will likely present you with several options you can choose from. They might offer you to pay an additional $20 for every bill over the next 3 months, or they might tier payments and have you do something like this:
- $10 first month
- $20 second month
- $30 third month
Let’s say that you won’t be able to pay multiple credit card payments in a month. Whether you lost your job or had to spend your savings on an emergency fund, you might find that you have a plethora of payments and an inability to make any of them. One method you could use is to take out a small consolidation loan.
Consolidation means that you would be taking all of your debt, combining it, and then putting it into one lump sum. For example, you might have debt like the following:
- $300 Target Red Card
- $1,500 Discover Card
- $600 American Express
- $300 Wal-Mart Card
Altogether, you might have a monthly payment of $200, with each being around $50 for the minimum payment. What you could do is inquire about taking out a personal loan of $2,700 through your bank. You could then use this money and pay off all of your credit cards at once. Then you might even have a lower monthly payment or interest fee in addition to the benefit of having just one payment instead of four.
This is risky because when you are already in debt, the last thing you want to do is go further into debt. Dave Ramsay helps to discuss the dangers of debt consolidation in the video below:
In the video, he discussed how it is the mentality that is the most important when working through this debt. Some individuals might apply for that $2,700 loan and see that they are actually approved for $5,000. They might end up spending it all, putting them in even more debt in the first place.
If you take this course of action, remember to be more responsible with it than you might have been with a maxed-out credit card. It’s easy to spend away when you have that padded amount, but it will just put you right back in the same spot you were when the initial credit card payment was missed.
Another option that you might have, even though it’s definitely not the best option, is to weigh your options with other payments that you have. This would involve looking at your utility bills, such as electric, and determining if paying this late, just one month, would be an option. It’s risky because if you do miss that payment, you could set yourself even further back and be at risk of getting your electric shut off.
This is still an option for those that know they are going to have a source of income within the next few weeks that can guarantee they will be able to pay that utility bill off. For example, let’s say that your electric bill of $100 is due on the 15th of the month. You get paid the 1st and the 15thh of every month. Your credit card payment of $35 is due on the 10th. You only have $100 which you planned on putting towards the electric. It might be in your interest to pay the $35 first because of the high interest and late fees that the card would charge you. You would then want to get in contact with your electric company and work out a payment plan. You can even see if you qualify for The Low Income Home Energy Assistance Program (Benefits, n.d.).
This could work for you because that late credit card payment might charge you $35, whereas a late electric payment fee might only be $10. Most areas of the country you are located have laws protecting residents so that the electric company won’t be able to shut off this utility right away. You can still use the rest of your money, $65, to make a partial payment and then work out a deal with the company to resolve this debt.
Aside from consolidation and swapping payments, there are a few other things you can do:
- take out a personal loan (family, friend, or even employer)
- sell items from your home (old books or electronics, even a garage sale)
- find a side gig (writing, dog walking, transcribing, or babysitting)
The most important thing to always remember is to just talk to the creditor! That can be scary for some, but luckily there are some helpful tips and reminders that will make this process easier for you.
How to Talk to Creditors
Before calling a creditor, ensure you have all of your financial information gathered and easily accessible in front of you. First, start with your account information and have your credit card right next to you when it is time to call or message them. You want to make sure that you have all of your important basic information as well, such as your home address and phone number.
They are going to ask you for all this information and other forms of verification to ensure that it is you who is making the call. You will also want to have your bank account information in case you do need to set up a payment through your checking account.
Ensure your phone or your computer is charged so that you don’t lose contact with them. After that, you want to have an estimate of what your current financial status is. What are your abilities to make a monthly payment? You might have lost your job so even though you have made $100 payments monthly in the past, you won’t be able to go back to that for a while. You’ll want to have these financial pictures ready so that no matter what they ask, you are prepared to tell them.
Ensure that you do have actual numbers when talking to them. Don’t just say that you might be able to pay “a little bit.” You want to specifically tell them that you will only be able to pay $5, $10, or $20, or however much you can manage.
Let them know whether this is a temporary situation or something that is long lasting. If you lost your job and have been struggling to find a new one, then you will want to let them know that this is something that will be going on for a while. They will help work with you so that you might even be able to lower your monthly payments. In some situations, they could hold your account so that you would be able to miss a month’s payment so long as you agree to resume normal payments and pay off that missed amount.
This usually doesn’t extend very long, and most of the time that only happens in extreme circumstances.
If you experienced an accident and ended up losing some of your income, that is more of a temporary situation. Make sure that you have all this information prepared so that you can tell them everything that has been going on.
Prepare yourself to have more than one option. You might only be able to pay $5 or $10 a month for the next three months, but you also want to have a backup plan in case they are not going to work with you on this. You might offer them zero dollars next month, but $25 the month after this. Come up with a few ideas of what you would be able to manage in the following months to make sure that you won’t be blindsided if they don’t approve an initial request.
These creditors are going to be real people that you talk to, but at the same time, a tragic story isn’t going to change the financial situation. Be honest and upfront. If you lost your job, just tell them that you lost your job. Don’t try and make up an elaborate story about how you were robbed, or had a death in the family, or something else that just simply isn’t true.
They will have sympathy for you, but the more extreme your situation won’t necessarily change the outcomes that you have.
Once you do contact them and come up with a plan, make sure that you are sticking to it the entire time. You don’t want to put yourself in a situation where you fall off track once again.
Tips for Staying on Top of Debt
If you run into a situation like this, there’s a good chance that you are not properly managing your finances. Of course, if there was a really bad accident or random freak occurrence and you had to pay a certain amount, that financial state won’t necessarily happen again. At the same time, we need to be prepared for whatever happens because there is always a possibility of two bad things happening in a row!
The first tip to help you stay on track is to set up a savings account you can have for accidents or random situations. This account is not for fun. It should be for emergencies only. Create an emergency fund of at least $2,000. Of course, you can’t just pull this money out of thin air and it might take you a year or longer to save this up, but you should be making payments to an emergency fund, just as you would another debt. Put in $25 or $50 a month to start with, once you’re back on track with all of your financials.
You want to have this because it will give you peace of mind. It can be tempting to see that emergency fund going unspent because you might want to use it for things like clothes, movies, food, and so on.
However, now that you have already been through this debt, you have to use this experience to remind you that you never want to be in the same place once again. Do everything within your power to ensure that you create a strong emergency fund, so you’ll never have to worry about not being able to make a payment again.
After this, it’s time to look at how you can begin to consolidate your debt and pay it down so you are in charge of your debt rather than it being in charge of you.
There are two different methods of suggested debt payment that could help you. One is the snowball method, and the other is the avalanche method. In the video below, you can see the logistics of how these methods work to get an understanding of what steps they involve, as well as who they will work best for:
These are rather helpful because they give you a way to prioritize your debt either based on the interest rate or on the total amount. It is up to you to look at this as well as your financial situation to pick something that works best for both.
Once you have begun to get your financial situation back on track, make sure that you keep checking in with yourself to have good choices for your overall finances. Money isn’t always just about a cash amount – it’s mostly about your mindset.
Don’t spend money on things that you don’t need. It sounds so simple, but we often forget the difference between our needs and our wants.
Cover basic expenses first. Beyond that, look at everything that you purchase and decide if it is really worth it in the end. Does that $50 pair of sneakers actually provide you with happiness, or would putting that money towards a debt make you more relieved? Set up your future self so that you will have less debt and more income to spend on those things that you wish to purchase.
The worst thing that could possibly happen in this situation that you are currently in is that it gets even worse.
You don’t want to let these payments go without making an effort to communicate, because that is when bad things will happen. Missing one payment isn’t the end of the world. However, missing one payment and then another and then another and then another can really affect your overall life and financial status.
What Happens If Cards Go Unpaid
Perhaps you have already found that a payment has come and passed, and you are now wondering what is going to happen next. If you have already missed a payment, a few things can occur.
If you missed the payment, your first option is to pay it off as quickly as possible, plus the late fee incurred. If it is just a few days late, not much will happen, and it won’t have a drastic effect on your credit score. The worst thing is that you will have a late fee.
If you are beyond just a few days late, you will start to receive calls from creditors. It’s tempting to block them and ignore their calls, but they are really there to help. They aren’t going to yell at you or make you feel bad about missing a payment. Things happen, and they’re just doing their job. It’s not like you directly owe the person calling you the money, so they shouldn’t be threatening or aggressive in any way.
Talking things out and communicating is always best. Let’s say that you have gone a few months without talking to them or making any payments whatsoever. Depending on your agreement, a few things might occur.
You will see a difference in your credit report. Your payment history can greatly affect your overall score, so the more you miss payments, the lower it will be. There will be a late fee for each missed payment, and this is based on your agreement. It might be a flat fee, or it might be a percentage of the debt total. Interest will continue to collect, so the debt will only rise as long as it is unpaid.
After 6 months of unpaid monthly payments, you might get a charge-off. This is when the account would close, and you will no longer be able to use any credit, even if you paid the amount in full. It will have a negative effect on your account that can last up to 7 years. This is why it is so essential that you are communicating. Even if you just make a very small payment, you can avoid this charge-off after coming up with an agreement with the company.
After your card has been charged off, it will usually stay on your account for a few months. If it continues to go unpaid, then it will be sent to a collections agency or even an attorney. The collections agency will call you relentlessly until you’ve made an agreement. They will also likely mail you letters.
You can make an agreement with them to pay off the debt, and many collectors will take less than the debt amount. If you owed $1,500 to a credit card company and it got charged off, you might be able to only pay $1,000 and have the debt cleared. However, that information will show on your credit report and can have an impact on your taxes for the following year.
If the debt is a very large amount, it might even get sent to an attorney. There is always a chance they could sue you, but this is in extreme circumstances when you don’t have any contact whatsoever for months at a time (Discover, n.d.).
Related Questions
Don’t ever think that you won’t have options when it comes to resolving your debt. We’ve covered a few more topics to give you peace of mind when you come face to face with a financial struggle.
Is there legal action that will be taken against me?
You might worry about being arrested or fined by law enforcement. You will not be arrested if you cannot pay your credit card debt. In some cases, for high amounts of unpaid debt, there is a potential they could sue. This is a long and expensive process, so it usually only occurs when the debtor has failed to make contact over a long period of time.
What other ways can this affect my credit score?
Having a high amount of debt can be bad for your credit score, but aside from that, there are a few other things that could show up on your report. A charged-off account or contact from collection agencies, as well as frequent late payments, will also show up on your report and can have a negative impact on your report. In most cases, these facts will appear on a credit report for up to 7 years, even after negotiations might have been made.