How to Cope and Consolidate Your Credit Card Debt When Unemployed

How to Cope and Consolidate Your Credit Card Debt When Unemployed
BY Rebecca Lake
Jul 8, 2020
 - Updated 
Mar 12, 2023
Key Takeaways:
  • Debt consolidation can help you streamline your monthly payments.
  • A debt consolidation service may require proof of income to qualify.
  • Debt negotiation is one alternative you might consider if unemployed.

Being out of work can be stressful since you still have bills to pay. If you're unemployed, credit card debt could ‌feel particularly burdensome.

You might be wondering whether debt consolidation for unemployed people is an option. Consolidating credit card debt could help you lower your monthly payment or your interest rate, or both. 

Qualifying for debt consolidation when unemployed can be challenging, since debt consolidation services usually require you to have a steady income. However, it's not an option you should count out entirely if you're unemployed with credit card debt. 

How to take stock of your credit card debt when you lose your job

Losing a job isn't pleasant, especially when it's unexpected. If you have credit card debt, reviewing what you owe can help you figure out an action plan for managing it while you're out of work.

Here's how to take stock of your credit card debt:

  • Make a list of your credit cards, including the creditor name and the current balance.

  • Note the minimum payment for each one and the monthly payment you've been making up to this point. 

  • Review your monthly due dates.

  • Look at any automatic or recurring charges that are linked to your card. 

If you can cancel any automatic or recurring charges, that can keep your balances from increasing. For example, if you normally charge streaming subscriptions to your card, you might want to cut those expenses out of your budget temporarily. 

The goal here is to get a better idea of what you owe and where credit card debt payments fit into your budget. 

Four steps to take when you're unemployed and struggling to pay your bills

Paying at least the minimum due on your credit cards while unemployed can keep you from falling behind. However, if you've run the numbers and you don't think you'll be able to manage your credit card payments or other bills while unemployed, there are a few things you can do to cope.

1. Contact your creditors

When credit cards go unpaid, you can eventually land in default. That can lead to your account being sent to collections and in a worst-case scenario, your creditor might sue you for the balance.

Credit card issuers don't want that and you don't either, since a creditor lawsuit can hurt your credit and‌ result in wage or bank account garnishments. If you're worried about making your payments on time, it's smart to reach out to the credit card issuer as soon as possible.

Your credit card issuer might have a hardship program for people who are unemployed. Benefits might include:

  • Fee waivers

  • Interest rate reductions

  • Payment forbearance

Every credit card issuer has different policies for hardship. The best way to find out what your card issuer offers is to call the customer service number on the back of your card. 

2. Apply for government aid

There's no federal credit card debt relief program, but you might qualify for other types of aid that can help you pay the bills. 

For example, you might be able to get:

  • Unemployment benefits

  • Help with utility bills through the LIHEAP program

  • Supplemental Nutrition Assistance Benefits (food stamps)

  • Temporary Assistance for Needy Families (TANF)

  • Federal student loan forbearance

You can start by applying for unemployment benefits with your local unemployment agency. Unemployment could help to cover your basic household bills until you can get back to work. 

If you're not sure what else you might qualify for, you can check with your local social services office. Someone there should be able to tell you what type of federal or state government aid programs you may be eligible for. 

3. Watch your budget

Fine-tuning your budget while you're unemployed can help you cut out any unnecessary spending. Some of the things you might try to reduce or cut include:

  • Streaming services

  • Gym memberships

  • Eating out

  • New clothes

  • Hobbies or recreation that cost money

  • Entertainment (i.e., going to the movies, buying concert tickets, etc.)

  • Travel

What you cut can depend on your budget categories and how much income you have to work with. The more you can cut, the further your money can go. 

4. Try avoiding running up more debt

Being unemployed with credit card debt can be a catch-22. Because you might need to use your cards to cover basic expenses.

That's completely understandable if you haven't been able to get unemployment benefits yet or you don't have a lot of money in emergency savings to pay the bills. But it's a good idea to avoid using your cards if you can. 

The less you have to rely on credit cards (or loans) to get by until you're able to find a new job, the less debt you're adding to the pile. 

Five ways to manage your credit card debt while unemployed

If you're trying to stay on top of your credit cards while unemployed, you've got some options. Comparing each one can help you decide which path makes the most sense for your situation. 

Here are some of the different ways to approach credit card debt when unemployed. 

If you need…Consider…How to get credit card reliefYou should know
Short-term reliefForbearance (temporary break from payments)Contact your credit card issuerInterest may still accrue
Help with budgetingCredit counselorSearch on NFCC.comWon’t reduce what you owe
Streamlined paymentsDebt consolidation loanCompare online and get rate quotesYou may need a cosigner if you’re unemployed
A lower interest rate or more time to pay0% balance transferCompare onlineRequires good credit
Lower your debtsDebt reliefTalk to a certified debt consultantCredit score might drop
Fresh startChapter 7 bankruptcyTalk to an attorneyYou might have to give up assets

Frequently Asked Questions

Can you stop credit card payments if you're unemployed?

If you're unemployed, you can stop making credit card payments, but that could trigger late fees and lead to your account being sent to collections. A better solution is to reach out to your credit card issuer to find out if any hardship or forbearance programs are available that might give you a temporary break from having to make payments. 

Can unemployment be garnished for credit card debt?

Unemployment benefits can't be garnished for credit card debt. You may, however, be subject to unemployment garnishment if you owe federal or state taxes, court-ordered child support, or federal student loan debt.

Is there a credit card debt forgiveness program?

Credit card debt can't be forgiven through a federal program the way student loans can, but it's possible to seek credit card debt relief. For example, you may be able to get relief by negotiating your credit card debts. That'd allow you to pay back less than what's owed and have the remaining balance due canceled.