Borrow Debt

The Dos and Don’ts of Credit Right Now

Robin Saks Frankel  |  March 19, 2020

What to do — and what not to do — if you’re worried about credit card bills during the Coronavirus crisis.

Coronavirus (COVID-19) has put us all on edge. Credit cards are a key tool for those hit hard by the financial crisis. Banks and credit card issuers are creating new guidelines and assistance programs for those who may find themselves temporarily short of what they need to pay their bills. 

Here are some do’s and don’ts when it comes to your credit if you’re concerned about how to handle mounting bills.

Do ask your issuer for temporary relief

“The very first thing people can do is be proactive in the way they communicate with their creditors,” says Bruce McClary, vice president of communications and spokesperson at the National Foundation for Credit Counseling. “Reach out and ask what programs are available.”

Several major issuers including Capital One, Chase, Citibank and U.S. Bank have dedicated pages on their websites offering the most up-to-date information about the type of help they may be able to provide. Those who qualify may be able to get fee waivers, reduced interest or begin a collection forbearance program.

Don’t assume you can skip a payment

Just because many banks have pledged to take actions to help those facing uncertain financial circumstances doesn’t mean you can just go ahead and skip or miss a payment. The unilateral recommendation in statements put out by major issuers is to call the number on the back of your card and work out what would be best for your particular circumstances. If you don’t have an agreement in place and you don’t pay your bill, your credit score will take a hit. (Here’s what really happens when you don’t pay your credit card bill.)

Do ask for an increase on your credit limit

If it’s going to temporarily help you if you’re in a cash crunch — e.g. if you need additional spending power to stock up on essential items — call your lender and request a credit line increase.

Don’t panic spend and hit the spending limit on your card

It can seem like a good idea to buy a year’s supply of paper products now while they’re flying off the shelves, but remember: The more you charge on your card, the harder it will be to get out of debt if your immediate financial future is uncertain. Maxing out your card will also affect your overall credit standing because your credit utilization, a major factor in calculating your score, will be impacted.

Do consider a balance transfer card 

If your credit is in good standing and you qualify, signing up for a card with a 0% APR offer can temporarily ease the burden of carrying debt. There are multiple cards out there offering interest-free periods ranging anywhere from 12 months to nearly two years. (Here’s what you need to know about 0% APR deals.)

Don’t sign up for the first good offer you see

Many balance transfer cards that offer the longest introductory 0% APR periods also charge a balance transfer fee — typically 3% to 5% of the amount being transferred. It pays to do the math here because a card with no balance transfer fee but shorter terms could be a cheaper option for you. You should also steer clear of signing up for multiple 0% offers within a short period of time as too many hard credit pulls will also damage your credit score. If you need longer terms than what you can find on a card with a 0% APR offer, consider a personal loan.

Do consider turning to a nonprofit credit counseling agency

If you’re really struggling to stay on top of your debts, or you’re already in a less-than-ideal place financially, reach out for help. Unlike for-profit debt solution companies, a nonprofit credit counselor gives impartial and comprehensive advice based on a holistic approach, at no cost to you, McClary says.

Don’t sign up for a quick debt relief program

Although these programs heavily advertise that they can perform wonders for your debt and/or credit score, these for-profit programs prey on people’s uncertainty and fear, McClary says. They’re costly and often leave customers worse off than before. His advice: “If you want to get things back on track, reach out to your creditors directly and work with them one on one.”

More on HerMoney:


Next Article: