Struggling With Credit Card Debt? Forbearance Could Offer (Temporary) Relief

It’s a bad time to carry a credit card balance.

Consumer debt hit a new record last fall, when total credit card balances in the US surpassed the $1 trillion-dollar mark. Average consumer balances are also up, according to Experian, as are delinquencies, according to the Federal Reserve. To make matters worse, interest rates on credit cards hover above 20% APR, making it more expensive to carry a balance on your card.

If you’re struggling to pay down your credit card debt, you may have come across credit card forbearance options. If you’re facing financial difficulties, applying for forbearance can temporarily defer your payments, lower your monthly payment amount and even reduce your interest charges.

What is credit card forbearance?

Credit card forbearance gives you more time to pay down your credit card balance with potentially lower interest rates or fees for a limited period. Your card issuer may:

• Pause your monthly payments temporarily
• Pause or lower interest rates on existing balances
• Waive fees for late or returned payments
• Establish an installment plan
• Increase your credit limit 

Each credit card issuer has its own rules regarding forbearance. There are also credit card debt programs available through third party companies, such as credit counseling agencies and debt settlement companies. Be careful if you’re exploring forbearance with a third-party company -- they might charge you a fee for a service you can request on your own.

Pros and cons of credit card forbearance

Credit card forbearance can be helpful if you need a break to catch up on unpaid credit card bills, but it’s not a long-term solution.

Is forbearance different from a credit card hardship program?

Credit card hardship programs are a form of forbearance that can help consumers get a break from their debt and hard-to-control credit card bills. In most cases, credit card hardship programs and forbearance programs are typically one and the same.

These programs are offered through credit card issuers and can include forbearance options like paused payments, lower interest rates, forgiveness of certain credit card fees, and the creation of credit card installment plans, among other things.

Should I apply for credit card forbearance?

If you’re in too deep with credit card debt and you need help to turn the situation around, forbearance might offer some breathing room. 

You might consider credit card forbearance if:

• You’re struggling to pay credit card bills each month. If you can’t keep up with all your bills and you have no wiggle room in your budget to make a change, asking for a lower monthly payment, waived fees, lower interest rates or another type of forbearance could give you some room to breathe.
• Your income has decreased. A temporary drop in income due to pregnancy and delivery, a pause in employment or any other issue is another good reason to consider credit card forbearance programs.
• You’re experiencing a financial hardship. If you lose your job, your income disappears or you are suddenly ill, credit card forbearance can help avoid missing a credit card payment while you figure out a long-term solution for your finances.

While the reasons above are good ones for seeking out credit card forbearance programs, remember that these programs do not provide a long-term solution to debt or overspending. Use this time to pay down your debt (if you can) or catch up on other bills.

How to apply for credit card forbearance

Your path into credit card forbearance will depend on the credit card issuer(s) you work with and what they require. However, here are some general steps to help you begin the process.

• Call the number on the back of your card. Credit card issuers tend to shy away from publishing forbearance options on their websites because terms can vary by borrower. Call the number on the back of your card to inquire about getting help.
• Ask about various forbearance options. Speak with a representative about the credit card payment options that may be available to you based on your income, delinquency status and other factors.
• Consider your options. If your credit card issuer offers some forbearance options you can be approved for, consider which ones might benefit you the most. For example, a temporarily lowered payment or interest rate might free up additional cash you can use to catch up on other bills. Or, a long-term payment plan could get you on a path out of debt, but you will typically lose access to your card’s benefits and features.

Will credit card forbearance hurt my credit score?

Credit card forbearance could impact your credit score, depending on the type of forbearance you receive and what you do to address your debt along the way. But enrolling in a forbearance plan itself typically does not change your credit score. However, other lenders will be able to see you are utilizing a program to get out of debt since this information is reported to the credit bureaus.

Other factors to consider:

• An increase in your credit limit could reduce your credit utilization ratio, which can help improve your credit score.
• Failure to stick with a credit card forbearance program will be reported to the credit bureaus, which can negatively affect your credit score.
• Failure to stick with a forbearance program can result in your credit card being canceled, which can negatively impact your credit score.
• Sticking to a credit card program, making on-time payments and slowly paying down existing debt can help improve your credit score over time.