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What Is a Credit Card Hardship Program?

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By Eva Norlyk Smith, Ph.D.
May 22, 2009

Sometimes life throws us a curve ball. Life events like a divorce or an illness not only create physical or emotional upheaval, they also often lead to financial hardship. Financial institutions are frequently faced with situations where good borrowers are tripped up because of circumstances beyond their control. As a result, many financial institutions, including credit card companies, have a hardship program to help customers over a rough spot.

A hardship program is similar to a loan workout, which helps restructure your debt to prevent you from defaulting. A credit card hardship program is different from a “Payment Protection Plan,” which is a paid service that will take over your credit card payments in case of unexpected events.

In a credit card hardship program, you’d offer to pay a fixed amount that you can afford on your credit card each month. In turn, your credit card company might lower the interest rate charged on your credit card account, lower your monthly payments to a level you can afford, or agree to delay payments for six to twelve months to give you a chance to get back on your feet.

Hardship programs aren’t targeting people who’ve maxed out their credit cards and are looking for a way out. Typically, it’s reserved for life events which cause real hardship: unemployment, a divorce, death of a spouse, a death in the family that caused unexpected expenses, a long-term illness, and so on.

For good reasons, credit card companies don’t advertise hardship programs, and you will mainly find information about them in internet financial forums. Yet, with credit card defaults and charge-offs climbing to historic highs, card issuers may be increasingly motivated to work with cardholders in danger of defaulting. Some people report being successful in applying for a hardship program when their credit card company raised the interest rate and monthly minimums on their card, making them unable to pay their monthly credit card payments.

There are potential downsides, however. There is no guarantee that you will be able to negotiate a hardship program. And once your lender finds out that you’re struggling, they could instead decide to lower your credit limit or even close your credit card.

Secondly, enrolling in a hardship program will likely be noted on your credit card and affect your credit score. This could result in repercussions if you carry debt on other credit cards.

In short, trying to negotiate a hardship agreement should always be a last resort. Still, if you’re sincere in wanting to make good on your credit card debt and don’t really have any other options, it’s worth a try. If you don’t want to go it alone, an alternative is to look for a free credit counseling service, which can help you develop a debt management plan. The credit counselors can negotiate with lenders on your behalf to lower both your interest rate and monthly payments.

For more details, see Struggling with Credit Card Debt? How to Negotiate Better Terms