One of the most painful events most people will go through is getting laid off, especially if it’s a surprise. One moment you are plugging away at work while the next you are walking out adrift, holding a boxful of your possessions. Talk about pain!
But it hits you: Not only are you out of work, but you must also pay your bills with no income. For those who are part of the Americans’ minority with three to around six months of expenses in savings, that may not be such an issue. For most people, however, raising the money to pay such bills when they’re out of their usual work is a real struggle.
But, the good news is that if it is your credit card bills, you can avoid doing long-lasting damage to your credit by following certain steps. Acting fast is vital, so go through the information below to avoid getting burned by default or missed payments.
In most situations, we advise people to use a credit card to make the most of their purchases so that they could maximize rewards according to the payment processing experts at Payment Savvy, LLC. In this situation, however, the right course of action to take when you have been laid off is to quickly and significantly cut back on your usual spending. You should, ideally, try to keep off from making any more purchases using your credit card. Ensuring your next bill is as small as possible will reduce the stress on your mind since you are scraping together the money to meet your specific monthly obligations. If you can’t stop charging, however, the next appropriate thing to do is to cut down your spending to only the bare essentials. It’ll be much easier, after all, to settle a small credit debt instead of a large one.
Get in touch with your bank – immediately
A lot of workers who have recently been laid off fall into a low-grade denial, making themselves believe that they’ll find a means to make all their payments. That causes them to avoid getting in contact with creditors immediately when they realize they can’t pay their bills, so they’re hoping something magical will work out at their 11th hour.
However, failing to contact the bank when you know you’re not going to be in a position to make certain payment is a huge mistake. By contacting your creditor right away, you’re taking a crucial proactive step that will certainly show your bank that you aren’t trying to be sketchy or avoid your obligation. However, apart from creating goodwill between you and your particular bank, immediately calling your credit card company can also yield some assistance in dealing with your payments.
Inquire about hardship programs
The Great Recession began in 2008. From this time, many credit unions and major banks have introduced “hardship programs” for those who have been laid off. Usually, the programs are provided to customers who have proven their responsibility with credit in their records. These are customers who are also experiencing a temporary setback.
These hardship programs vary from bank to bank. However, most offer good customers with smaller minimum payments, extensions on a bill due dates, increased flexibility with payment terms, or some combination of those. Since you are going to call your bank right away after you have lost your job, make sure to ask your bank about its particular hardship program first.
Ask about any other special programs
There are certain situations that banks introduce special programs for those industries that have recently experienced a huge wave of layoffs of furloughs. In most cases, these are only plumped-up versions of existing hardship programs of banks, but they may provide some additional benefits and be much easier to access.
In October 2013, an example of this came up when around 800,000 federal employees had been furloughed. This was because of the shutdown of the government. Within a week, a few major banks came in to provide those workers with programs to assist them in avoiding defaulting on credit cards and mortgaged when they were living without a paycheck. Most banks are also willing and ready to work with customers that have proven to be responsible in the past. That means that you should make sure to ask for assistance when you get in touch with your specific creditors.
For now, only make minimums
Although it’s not ideal, when you’re just getting by, it would be a better option to only make minimum payments on your particular credit card than making no payments at all. By making timely minimums, you can prevent your credit score from being badly affected. However, you must pay off any debt that you might have accrued when you were laid off immediately you start receiving a paycheck again.
Also, if you will be in a position to increase your payments in a couple of months, then keep paying the specified minimum amount for now. For instance, you may have more money when you’re about to begin a new job or when you have almost paid a priority debt. In case you will only be in a position to afford the specified minimum payment in the long term, figure out if you can acquire a different deal so that you can pay less interest.
You may also be in a position to:
– Transfer the debt to a different card that charges less interest – known as a “balance transfer.”
– Obtain a loan that will charge less interest compared to your credit card
– When you obtain a loan, be sure that it isn’t secured on your house (like a mortgage). You may lose your house when a loan is secured on your house, and you cannot pay it back.
You must only use your new card or loan to assist you in paying off the debt that you already have. Avoid spending any more on your card; it’s a prudent idea to cut it up to avoid using it any more. Compare the loans or cards you can obtain from different companies. You will need to think about:
– Whether your old credit card company will request a fee to transfer your balance to a different card
– How much charges and interest you will pay on the new loan or card
Although getting laid off can take a serious hit to your financial health, you can reduce the damage by taking action immediately to keep up with your specific credit card payments. With the tips above, you can stay on the straight, narrow down with your creditors and secure the positive credit history you have worked so hard to build.