Credit Card Forbearance: Your Complete Guide to Pausing Payments

If there’s one thing you can count on, it’s to expect the unexpected. Maybe your car needed repairs the same month your washing machine broke and had to be replaced. Or maybe your hours at work got cut and you had to charge your bills on a credit card for a few months until you were back to a full-time schedule.

It’s easy enough to end up with a larger credit card balance than you bargained for when life doesn’t go your way. And keeping up with a large balance while also covering rent, car payments, and other expenses may be stressful. If you need a way out, it’s hard to know how to pay off your debt. You may want to explore credit card forbearance.

Credit card forbearance, sometimes called a credit card hardship program, is a temporary pause or reduction of your payments arranged directly with your card issuer. It applies to unsecured debt, such as credit card balances. Forbearance does not cancel what you owe; it delays it.

What Is Credit Card Forbearance?

Forbearance is a temporary pause or reduction of payments that may apply to many types of debt, including a mortgage, student loans, and auto loans.

Credit card forbearance defined

With credit card forbearance, your issuer will generally let you either pause your minimum payments for a period of time or lower them, depending on what works best for you.

The length of credit card forbearance varies and depends on who you’re working with, and usually lasts between a few months and a full year.

Interest usually continues to accrue on your balance during credit card forbearance. Some credit card companies may agree to waive interest while your payments are on pause. You may also be eligible for a lower interest rate during forbearance.

Credit card companies may work with borrowers to offer relief from payments when they’re experiencing a financial hardship. Some reasons for forbearance may include:

• Divorce

• Death of a loved one

• Illness

• Loss of a job

Credit card forbearance became better known in 2020, when card issuers stepped up and offered borrowers relief during the COVID-19 pandemic. Lawmakers didn’t set rules on how forbearance works, and no federal laws require credit card companies to offer forbearance. Each credit card company gets to decide whether to allow forbearance, how long it lasts, and exactly what relief is made available.

In credit card forbearance, you’re still required to pay back your entire balance eventually. Just as debt settlement could appear on your credit report, so could credit card forbearance. Forbearance itself doesn’t affect your credit standing, but some of the spinoff effects could. For example, if your lender reports your credit card payments as late or skipped, it could cause your credit score to drop. And if your balance grows too much from the interest charges, that could also set your credit score back.  

Freedom Debt Relief is not a Credit Repair Organization and does not provide, or offer, services or advice to repair, modify, or improve your credit.

Types of credit card forbearance programs

Credit card forbearance may take a few different forms. Types of relief could temporarily include the following:

• Pause payments

• Make smaller payments

• Have your interest rate reduced or interest waived altogether

• Have late payment fees waived

Your credit card company should explain which options are available to you, the terms, and how long forbearance will last.

You May Like These

Debt and Divorce: From Division to Debt Relief

How to Stop Debt Collection Calls

Need to Skip a Loan Payment Because of COVID-19? Talk to Your Lender Now

Forbearance vs. Deferment: Understanding the Difference

Credit card companies may offer hardship programs that provide relief for borrowers with extenuating financial circumstances. Credit card companies often call these “forbearance” or “deferment” programs, and the details of those programs are specific to each issuer. Eligibility happens on a case-by-case basis. You’ll need to contact your credit card issuer and discuss your specific situation to learn what relief options are available.

• American Express: May let you reduce your monthly payments or get a temporary break from fees and interest.

• Wells Fargo: May offer you a reduced interest rate and minimum payments, or waive late fees, for a period of time.

• Capital One: May allow you to sign up for a payment plan.

To be clear, just because a credit card issuer offers forbearance doesn’t guarantee you’ll qualify. You’ll need to contact your credit card issuer to discuss your situation.

How Credit Card Forbearance Works

To qualify for credit card forbearance, you typically need to show proof of a financial hardship. You also need to reach out and ask for it. Don’t expect your credit card company to contact you and offer forbearance if you’ve fallen behind on payments.

Eligibility requirements for credit card forbearance

The requirements for credit card forbearance vary from one company to another. Be prepared to show proof of your financial hardship. The exact documentation you need will depend on your credit card company and the reason for forbearance.

If you’re requesting relief due to being out of a job, you’ll generally need to show proof of unemployment, which could include a copy of your termination agreement. If you’re asking for relief due to an illness, you may need a statement from a medical professional, or medical bills.

Without the right documentation, your request for forbearance may be rejected. Similarly, your credit card company will typically review your payment history to determine how current your account has been recently. If you have a history of missed payments, you may not qualify for forbearance if your credit card issuer thinks you’re unlikely to repay your debt after putting it on pause or temporarily lowering your payments.

You may also be denied credit card forbearance if your income isn’t sufficient, or if your credit score is poor. If you’re denied forbearance, you may want to explore credit card debt relief options.

The forbearance application process

The forbearance application process typically includes four steps:

1. Call your credit card issuer, or check its website for an online forbearance request form.

2. Ask to speak with the hardship or loss mitigation department.

3. Explain your financial hardship, such as a job loss, medical expense, or reduced income, and ask which temporary relief options are available.

4. Request the terms in writing, including the length of the relief period and what happens to your interest and fees.

To request credit card forbearance, you generally need to phone your issuer or fill out a form online and explain your situation. Your best bet is to check whether your credit card company has details on its website about how to apply.

The approval process for credit card forbearance varies from one lender to the next. You may be able to get an answer within days. In some cases, it could take weeks instead. If you apply for credit card forbearance by phone, be sure to ask about the timeline for getting a decision so you know what to expect.

Terms and conditions to understand

If you’re approved for credit card forbearance, make sure you understand how it works. Read any agreement or document provided by your credit card issuer carefully to understand what’s expected of you. Pay close attention to:

• Whether you’re required to still make monthly payments, and in what amount

• What interest or fees you’ll incur during forbearance

• The length of your forbearance period

Credit Card Forbearance Program Example

If you’re interested in credit card forbearance, a real-world example could give you a sense of what to expect.

American Express forbearance options

American Express offers credit card holders who qualify the option to reduce their monthly payments and interest rates, as well as have their fees put on pause. Cardholders can select a payment plan that works for them based on their income.

American Express offers both a short-term, 12-month relief plan and a longer-term, 48-month plan. Cardholders who qualify for short-term relief may still be able to make purchases on their card. Some may be subject to a lower spending limit. Those who get long-term relief may not be able to use their card in the interim.

Cardholders can call 1-866-703-4169 or apply for relief online.

Cardholders who qualify for relief through American Express should expect their minimum monthly payments, interest rates, and fees to reset once their relief period comes to an end. Cardholders should review their cardmember agreements to learn what terms apply after forbearance ends.

Benefits and Drawbacks of Credit Card Forbearance

Credit card forbearance may be a good solution if you’re struggling to keep up with your debt. It may also come with some drawbacks.

Short-term benefits of credit card forbearance

Short-term benefits could include the following:

• Temporary relief from your minimum monthly payments

• Fewer late fees, since you’re following an agreed-upon plan

• Protection from the credit score damage that comes with late or missed payments

Credit card forbearance could give you temporary relief from making your minimum monthly payments while you work through a hardship. That break might make it possible to get back on your feet and build some savings so you’re in a better position to pay your bills once forbearance is over. Forbearance could help you avoid late fees, reduce the amount of interest you rack up on your debt, and ward off the credit score damage from late or missed payments.

Also consider the mental health benefit of forbearance. A temporary break could give you peace of mind and help you focus on the hardship that’s made it difficult to pay your bills.

For example, imagine you normally make a minimum credit card payment of $900 a month. An injury keeps you out of work, so skipping that payment frees up $900 in your budget. That money could go toward rest, rehab, and whatever else your recovery needs.

Potential long-term drawbacks

Potential drawbacks could include the following:

• Interest that keeps adding to your balance while payments are paused or reduced

• A higher balance and higher payments once forbearance ends

• No reduction in what you ultimately owe

Credit card forbearance might offer temporary relief from making payments. Interest typically continues to accrue on your debt during that time. Once forbearance ends, you could end up with a higher balance and larger monthly payments because of that added interest.

Also, forbearance is not debt forgiveness. You’ll have to start making payments once your relief period is over, and that adjustment may be difficult.

For example, imagine you have an $8,000 credit card balance and a 24% APR that stays the same during your 12-month forbearance period. If your credit card company compounds interest daily on your debt, you could accrue an additional $2,169 in interest while your payments are on pause, even without borrowing more.

Impact on your credit score

Credit card forbearance may appear on your credit report if your credit card issuer decides to report it. As long as you’re not reported as late or delinquent during your relief period, forbearance itself shouldn’t directly hurt your credit score.

Credit card forbearance could also indirectly cause credit score damage. For example, if you don’t make payments toward your balance during forbearance, it may grow, driving up your credit utilization. Utilization measures your credit card balances against your credit limits. Higher credit utilization typically hurts credit scores.

Step-by-Step Guide to Applying for Credit Card Forbearance

If credit card forbearance seems like the right fit, a few steps could help you prepare to apply.

Before you apply: financial assessment

Before asking for credit card forbearance, figure out the monthly payment, if any, you could afford each month. Try calculating your expenses for a month, and then determine how much money you’re left with after you cover your essential bills.

Contact your credit card issuer

During that call, explain your financial situation in detail so your credit card company understands the constraints you’re dealing with. Find out how long the process of getting approved for forbearance takes, and ask if there’s an appeals process if your initial request is denied.

Documentation and proof of hardship

You’ll likely be asked for proof of your financial hardship when requesting credit card forbearance. Your credit card company may give you a list of specific documents to provide, such as pay stubs and proof of your recent hardship.

Managing your account during forbearance

You may want to track your account balance during forbearance to monitor how much interest is accruing. That could give you a sense of the monthly payments you’ll make when your relief period is over. Also, be sure to set a reminder on your calendar to know when forbearance ends and when your payments have to resume.

Finally, check your credit report and credit score during forbearance to make sure there’s no negative impact. Your credit card company should not report missed payments as delinquent during forbearance. Mistakes may still happen, so regular monitoring matters.

After Forbearance: Next Steps

Credit card forbearance offers temporary relief only. As your forbearance period comes to an end, it’s a good idea to prepare so you’re not overwhelmed.

Prepare for the end of forbearance

Keep track of the exact end of your forbearance period and when your first payment is due. In the months leading up to that point, start making room in your budget for credit card payments to help with that adjustment.

That could mean cutting back on expenses where possible to free up the money. You may also want to consider a second job, if you could manage one.

Options if you still can’t make payments

If the end of your forbearance period is looming and you’re worried about being able to make payments on your credit card debt, reach out to your issuer right away. It’s possible to request an extension of your forbearance period. Your credit card issuer decides whether to approve it.

If your financial situation has not changed much or at all since your forbearance period, it’s a sign that you may not be in a position to start making payments on your debt again. In that case, it could help to explore different debt relief options, including debt settlement or another solution, like bankruptcy.

Rebuilding your credit after forbearance

Credit card forbearance itself may not damage your credit score. The circumstances leading up to it might. Accumulating a larger balance could also lead to higher credit utilization, which could negatively affect your score.

Stay on top of your credit report with regular monitoring to make sure it’s accurate. If your financial situation has improved during your relief period and you’re able to make timely payments again, that could have a positive effect. Also, as you reduce your credit card balances, your credit utilization should decrease, another factor that could help you build good credit.

Consider trying a budget. There are lots of types and strategies even for those who hate math. Keeping an eye on your expenses could help you rebuild your credit after forbearance is over.

If you need debt relief in Indiana (or anywhere else in the country), explore your options. The first step is the most important one—find out more today.

Is Credit Card Forbearance Right for You?

Credit card forbearance is worth exploring when your payments are no longer manageable. Make sure it’s right for you.

Situations where forbearance makes sense

Credit card forbearance could be the right move when:

• You’re experiencing a temporary hardship, like injury or the loss of a job

• You expect your situation to improve in a year or so

• You can make partial payments on your debt but need your minimums reduced

If you don’t expect your financial situation to improve within the year, though, forbearance may not be a good solution for you. For example, if you’ve been injured to the point where you don’t think you’ll be able to work full-time again, forbearance may not help you. In that case, debt settlement could be a solution worth looking at.

Warning signs that you need more than forbearance

Forbearance is a temporary solution to a debt problem. If these signs apply to you, it may not be appropriate:

• You expect your financial hardship to be long-term

• You’ve been in forbearance before, and it made your financial situation worse

• You genuinely can’t afford to repay your debts in full

Alternative Debt Relief Options

Credit card forbearance may not be your only option if you’re struggling to make payments. A few alternatives are worth exploring, too.

Debt settlement and how it compares to forbearance

In debt settlement, you may not have to repay all of your debt in full. If you can show a hardship, your creditors may agree to accept less than the full balance and forgive the rest. The amount they accept varies by situation and by creditor.

Debt settlement could have a negative impact on your credit.

Credit counseling services

Credit counseling services could help you put together a plan to fully pay down your debt and improve your general financial picture. Credit counselors offer something called a debt management plan (DMP) where you consolidate your debts and repay them with a single monthly payment.

Bankruptcy

If you don’t think you’ll be able to repay your credit card balance in full even after forbearance, bankruptcy could be a good solution if you qualify for it.

Bankruptcy could be a better choice than forbearance when you’re struggling to keep up with debt beyond a credit card balance. Filing for bankruptcy will have a negative effect on your credit score.