Unemployed Can’t Pay Credit Cards

Income Is Not Part Of Your Credit Report

Your salary isnt included in your credit report, and its not a factor in determining your credit score. That means if youre able to pay your bills while unemployed and dont have to rack up debt to do so, your credit score wont necessarily be affected at all by unemployment. Thats yet another reason to make sure you have an adequate emergency savings fund.

Consider Taking Advantage Of A 0% Credit Card Offer

This option requires a great amount of financial discipline, but in the right circumstances, it can be just the lifeline you need. Many credit cards offer promotional periods in which you can get a 0% APR on balance transfers and/or purchases for 12, 18 or even 20 months. Over the short run, this can provide you with a break from your current cash flow problems and give you some breathing room to accumulate more money. But you absolutely must be in a position to pay that money back before the promotional period ends. Otherwise, youll end up in an even deeper hole, as most credit cards charge interest in the high double digits, sometimes approaching 30%.

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How To Pay Your Bills When You Cant Work

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Life is unpredictable. One moment youre healthy and active, and the next moment an accident or illness strikes unexpectantly and youre not a reality many people have recently experienced firsthand during the COVID-19 pandemic.

Think youre invincible? Of course you want to have a positive outlook on life its good for your overall health. However, you dont want to be naïve.

The truth is that 1 in 4 20-year-olds will experience a long-term disability and miss work for at least a year before they reach retirement age. And even short-term disabilities take their toll, affecting around 5 percent of working Americans each year.1

The reasons for missing work run the gamut. The ailment that tops the long-term disability list is musculoskeletal disorders . Then theres cancer , injuries due to fractures and sprains , mental health issues , and heart attacks and strokes . And there are other things that can keep you from working long-term and do a number on your familys income.2

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Achieve Financial Control How Much Debt Do You Have

Or speak to a debt consultant

Although unemployment went down slightly last month 13% in May compared to the record-high of 14.4% in April its still at the highest levels since the Great Depression. Experts can only guess at how quickly the economy may recover some expect it to bounce back once the coronavirus threat has passed, while others speculate that we could be in for a long, slow recovery similar to the Depression.

Regardless of how the economy overall is doing, what really matters is your employment situation. If youre one of the more than 40 million Americans who filed unemployment claims since March, you may be concerned about your finances, and especially how to manage credit card debt when you dont have income coming in like you used to.

Here are steps you can take to figure out what to do about your debt while youre unemployed:

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He Mustered Up The Courage To Call Up Consolidated Credit

Ryan had reservations about using credit counseling and debt consolidation services. Like many others, he thought it was too good to be true.

While I had heard of credit solution plans, they seemed insanely intimidating and a bit too good to be true. I wasnt quite sure they were legit. Plus, calling an absolute stranger and admitting my stupid decisions didnt sound too exciting.

When youre in debt thats beyond your ability to pay off, you have several debt relief options. Some include a debt management program, a consolidation loan, and bankruptcy. Feeling hopeless and defeated, Ryan took a leap of faith and contacted Consolidated Credit and never looked back.

Finally, I worked up the courage to call Consolidated Credit. It was a turning point in my life. They were understanding and helpful with creating a financial plan I could get behind. I felt my tension immediately disappear and my hope was restored.

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Avoid Charging As Much As Possible

Its all too tempting during unemployment to use your credit cards to get by. However, it can leave you in a situation that may be worse than when you started.

As soon as you lose your job, review your budget to find any expenses you can cut. Anything thats not a necessity should go until you find another job.

• Limit your budgets for dining out and entertainment
• Avoid any shopping thats not a must-have
• Cancel streaming services for music and video
• Cancel or suspend services you can do yourself, such as lawn work and pool service

Strip your budget down as much as you can. This will minimize the costs so you can survive for longer on your savings. It also means youll be less reliant on high interest rate credit cards.

Unemployment Can Affect Credit Scores Indirectly

Being unemployed or receiving unemployment benefits will not affect your score directly however, losing your job may have a trickle-down effect on your credit score:

• If you increase your debt and/or borrow more, then your credit utilization ratio may increase
• Difficulty paying bills on time and in full

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Does Your Story Sound Like Carls

Suddenly being out of work may be the last thing you expect, and losing a steady income can have a real impact on your finances and your family. Its difficult trying to keep on top of unpaid bills while looking for work, and not knowing what happens next can be a significant source of stress and anxiety.

But theres no need to do it alone

Does Unemployment Affect Credit

Being unemployed doesnt directly affect a credit score or credit profile. Credit reports dont typically collect information about employment status, so theres no need to worry about whether unemployment will decrease a credit score.

Unemployment can indirectly affect credit, however, especially when falling behind on payments for credit cards or loans. These tougher financial circumstances, if left unresolved, will negatively impact a credit score over time.

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Belt Tightening Loosens Up

Analysts think the drop was due to the torrent of federal stimulus money that was a five-figure windfall for some families. Between that and enhanced unemployment benefits and forbearance policies, Americans were able to pay off a lot of debt.

But now that the economy is stabilizing, demand for credit cards has gone back up. There were 6 million new credit card openings in March 2021, according to Equifax. That was the highest March figure on record and 32% more than March 2020.

People are spending more, but a lot of them are doing it with money they dont have in the bank. That comes as COVID financial relief is drying up.

About half the states have cut off the $300 a month in additional unemployment benefits the federal government was providing. That supplement will end for everybody on Sept. 6.

The Centers for Disease Controls moratorium on evictions expires Oct. 3. The pause on repaying student loans ends Jan. 31, 2022. Those federal dates might change, but the benefits bonanza will eventually expire.

Explore All Of Your Options

The ideal option is usually to keep making payments in full every month until your debts are all gone. Unfortunately, when your income is compromised this option may be impossible. Depending on how long youre unemployed, you may find that a debt management plan or debt settlement make sense for your situation. Or it might be that bankruptcy makes sense for you.

Its not often that we advise bankruptcy, but the laws exist for a reason, says Tuck. It can be a difficult process to navigate and it will likely damage your credit deeply, but that doesnt mean it isnt right for you. Sometimes it is the only viable option, says Tuck.

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Know You Have Options

It’s understandable if you feel anxious, confused and isolated when you’re in debt and unemployed. But help is out there.

Start with your creditors then move on to self-help strategies like budgeting and finally, seek assistance from trustworthy experts. This period of time will likely be temporary. Make sure that any strategies you use to handle debt will keep your finances as healthy as possible in the long term.

Where To Find Cash How To Prioritize Your Bills And Ways To Get Help

If youre one of the millions of Americans who’s been laid off or furloughed as a result of the coronavirus pandemic, your cash flow may have slowed to a trickle or stopped altogether. But the bills, of course, just keep on coming. It helps to have a plan in place to manage your finances until the crisis passes and youre back on the job. Heres some advice on how to pay your bills and when you may be able to postpone paying them.

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Prioritize Credit Card Payments

Americans tend to have more than one credit card and the average credit card balance is about $6,200.8

Pay what you can even if its just the monthly minimum. Dont go into avoidance mode and not pay them. If you do, youll be hammered with late fees. And your credit score will take a hit since payment history accounts for 35 percent of your overall score.9

If you find yourself with a late fee, ask your credit card company to waive it. During the height of the pandemic, several credit card companies waived their fees for customers affected by their new circumstances. You might want to ask to have your cards annual fee waived or reduced and ask for a lower interest rate.

Talk to your creditor to find out if you qualify for any hardship or relief programs. Thanks to the CARES Act of 2020, you might be able to defer or pause a payment, make a partial payment, forbear delinquent amounts, modify a loan or a contract, or suspend federal student loan payments.10

Option : Find More Affordable Living And Refinance Loans

Paying your bills after losing your job is not easy. But failing to pay your mortgage can lead to even larger consequences.

If you own a home, you can contact the mortgage company and try to negotiate a new payment plan. Your mortgage company might direct you to specific city or state hardship programs. These programs may help you to keep your home and refinance your monthly payment. They may also be able to help you with selling your home.

If you rent, you do have plenty of options. One of these options would be looking for a sub-lease and moving into a more affordable apartment.

In addition to seeking more affordable housing, you may want to chat with a credit or budget counselor. A budget counselor is a professional that is qualified to provide you with financial advice and potential solutions.

Many times, a budget counselor is appointed by the government to assist those who have been struggling with debt for long periods of time. This person has the ability to greatly assist with any recent changes in your budget to accommodate for less income and other financial issues.

For your auto loans, you have the opportunity to minimize your car payments or change the cadence or amount that you need to pay. Keep in mind that in the long run, this may increase your interest over time, but at least you have a solid short-term solution that can allow you to tap into your emergency budget.

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Cards And Less Than A Lifetime Later Ryan Is On His Way To Freedom

Now that Ryan has the tools he needs to overcome debt, hes staying on task and paying his debt down. Hes been enrolled in the program for two years and has made significant progress. Here are some of his learnings.

Since that initial call, Ive learned to stick to the financial game plan they created with me and Ive been ecstatically watching my debt melt away. Ive learned to live within my means and the budget that I have. Ive learned to get by and support my family without using credit cards. Ive learned that there is still some good in the world and that there are still some strangers who are ready and willing to hear you out and help however they can. With each paid off card balance, Im increasingly happier and my financial futures never looked so bright. I cant wait to complete my plan and be debt-free.

Option : Join A Delivery Or Ride Share App

Speaking of side-hustles and supplemental income, there is an option that is not only accessible but can be very stable and flexible with your own schedule: rideshare or delivery services.

To become a rideshare driver, all you need is a valid drivers license, a clean record, and a vehicle.

If you already commuted to work via car, youve got the vehicle part covered. In certain cities, you may not even need a car to apply for delivery jobs. You can use a bike or even get around on foot. The point here is that there are more options for earning money you just need to decide what works best for you and your current situation.

The amazing thing is, with supplemental income being obtained this way, you may be able to sustain it until you find a new full-time job. By that time, you may be getting used to the idea of having the extra cash whenever you need it or whenever you are able to perform the tasks.

At that point, you may be able to continue utilizing this side-hustle as a way to contribute to your emergency savings for the future.

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Become An Authorized User On Someone Elses Card

Potentially the easiest way to get access to a credit card without having any income, becoming an involves convincing a friend or family member to add a user to their own card. Having income is not a requirement to be an authorized user. The authorized user gets their own credit card with their name and information on it, but the person who owns the account is responsible for all payments. If the authorized user spends more than agreed to or doesnt pay everything back, it puts the account holder at risk . For that reason, its advisable to come up with a responsible spending limit and a payment plan with the account holder.

Apply For Unemployment Benefits And Other Government Assistance

If you qualify for jobless benefits, apply for them.

Food stamps and school lunch assistance can also save money that youll need for other critical expenses. Though many of us resist seeking government help, if you have a genuine need, remember that the programs were designed to help people like you navigate rough patches.

Avoid taking cash advances or signing up for financing plans during your time out of work and avoid using your credit cards, especially if you have unpaid credit card debt.

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Get In Touch With Your Credit Card Company

If you dont think you can pay your credit card bill, get in touch with your creditor right away. This general rule applies to all bills, like loan payments and utility bills. Virtually everyone has been through times of financial hardship, and you wont be the first person who needs help with credit card debt. In fact, most credit card issuers have policies in place for situations just like this.

Your credit card company likely offers some sort of financial hardship program, like reduced minimum payments, reduced APR, waived fees or credit card forbearance. Check out the credit card hardship programs offered by some mass-market credit card issuers below:

Tip: Request a written copy of the hardship program agreement for your records. Keep track of when you contacted your credit card issuer and who you spoke to. This can help if you need to dispute any inaccuracies down the road.

Talk To Your Lenders About Options

When your financial emergency is short-term, a few weeks up to a month, talking to your credit card companies or loan lenders may help. Many lenders especially if you have been working with them for a long time may be open to an extension. You can always take a late fee for the month as well if you have no other options. Keep in mind that late payments will impact your credit score.

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