Payment Program or Balance Liquidation Program
Consumers who are struggling with monthly credit card payments might be surprised to learn of a helpful program that is rarely discussed. These consumers have likely looked for help and advice from friends and family and may have even looked for help online or from financial institutions. There is one type of program that is rarely advertised, making it hard to find, but it might just be what struggling consumers are looking for. It’s called a hardship program and just about every creditor has one. For those struggling in the short-term, this type of program could be a great option. We are going to cover the basics of how to find out more about these programs, how to maximize their effectiveness, and how to avoid certain pitfalls. We’ll also explain a few similar programs and try to clarify the differences.
What is a credit card hardship program, anyway?
A hardship program is a form of short-term payment relief that is sometimes offered to consumers who are struggling to meet their financial commitments. These are typically administered in response to a job loss, medical circumstances, or other unforeseen financial difficulties. Typically, the creditor provides a lower interest rate along with some other concessions (for example: waived fees). These programs typically last between six months and one year and are usually dropped if the consumer misses a payment.
The program allows the consumer to retain a realistic pay schedule and overall level of financial commitment. At the same time, it helps the creditor ensure that it will continue to get steady payments from the debtor, and the creditor hopes that this leads to less complications than charging off the account, sending the account to collections, etc.
How do I enroll in a hardship program?
As a rule, hardship programs are not advertised. As you can imagine, it’s not in credit card companies’ best interest to tell consumers “If you can’t pay, let us know.” Instead, consumers have to call the creditor directly and initiate a conversation. But, it’s not quite as simple as it sounds. There are some important points to keep in mind when inquiring about a hardship program.
A hardship program is a great resource for consumers who find themselves struggling with credit on a short-term basis. But for consumers who are deeper in debt or have other financial difficulties, there might be better options. One such option is what the FDIC refers to as a “workout program,” which is essentially a hardship program designed for those with long-term difficulties.