When Can You Use a Credit Card Forbearance Program?

Keeping up with bills during times of financial hardship can feel overwhelming. Minimum payments can add up, and you may fall behind. Help might be available. One type of debt relief is called credit card forbearance.

Credit card forbearance could offer short-term relief, and allow you room to get back on your feet. Let’s look at credit card forbearance so you can decide if it’s right for you.

What Is Credit Card Forbearance?

Forbearance is a pause on a financial obligation, and it’s not just for credit card debt relief. Mortgages, student loans, personal loans, and auto loans can be paused temporarily through forbearance programs.

A credit card forbearance program might allow you to skip payments or lower your payments, depending on what works best for you. Some credit card forbearance or financial hardship programs waive some interest, late fees, or other charges. You might also get an interest rate reduction when you qualify for forbearance. Many credit card forbearance programs last up to a year.

There are no federally mandated requirements for forbearance, so each credit card issuer has its own guidelines. That’s why it’s important to read your agreement and make sure you understand the terms before agreeing to a credit card forbearance program. 

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How Does Credit Card Forbearance Work?

To get credit card forbearance, you must show that you have a financial hardship that makes it difficult to handle your bills. Hardships can be a loss of work or other big life change, or a widespread issue (like the coronavirus pandemic was a few years back). 

Credit card forbearance is something you usually have to ask for. Your credit card issuers generally won’t offer it to you if you fall behind on your payments. Depending on your situation and the program, you may be eligible for:

• A pause in payments for a specific time, usually up to 12 months

• Lower minimum monthly payments

• Fee waivers for previous late or skipped payments

• A lower interest rate.

Some credit card issuers pause interest charges while you’re in forbearance, but others keep adding interest. If that happens, you'll owe more at the end of your forbearance period, even if you don’t spend more on your credit card. Also, not all issuers allow you to keep using your credit card while you’re in forbearance.

At the end of the forbearance period, your credit card terms return to normal. Your interest rate and minimum payment go back to what they were, so you may need a plan to tackle your debt at that point.

When to Use Credit Card Forbearance (and When Not To)

Credit card forbearance could work well if your financial hardship is short-term and you need temporary relief. However, it’s not the right move for everyone.

When to consider credit card forbearance

• You have a short-term need for breathing room in your budget.

• A lower rate (or no interest) could help you tackle your debt faster.

• You need to make smaller payments for a time due to a change in circumstances.

When to avoid credit card forbearance

• You don’t expect your financial situation to improve for a long time.

• You’re worried about interest charges increasing your balance during the forbearance period.

• The credit card issuer doesn’t let you use your card, and you still need access to funds to cover bills.

Pros and Cons of Credit Card Forbearance

While it's not a one-size-fits-all solution, credit card forbearance may be a helpful tool. Let’s break down the pros and cons of credit card forbearance to help you decide if it's the right choice for you. 

Pros of credit card forbearance

• Short-term relief. When you're granted forbearance, you get a break from paying your credit cards. This pause may allow you to get back on your feet, build some savings, and start tackling your bills again.

• Avoiding late fees. When you enter into a forbearance agreement with your credit card company, the company often agrees to waive late fees and penalties for the duration of that agreement. Even though you eventually have to resume paying, you can have peace of mind knowing that late fees and penalties won’t be tacked onto your total balance.  

• Credit protection. Typically, a credit card company doesn't report missed or late payments to the credit bureaus during an agreed-upon period of forbearance. This helps protect your credit score from damage.

• Time to reorganize. Sometimes, all you need is a little time to rework your budget, and that's what credit card forbearance offers. You can also use this time to look into other options, including debt consolidation.

Cons of credit card forbearance

• Interest typically adds to your balance. You may not be making payments during forbearance, but your interest usually continues to accrue.

• Not a permanent fix. Credit card forbearance is strictly a short-term solution. At some point, you have to start making payments again.

• Higher monthly payments. Because interest commonly accrues during forbearance, you may find that your new payments are higher than they were before you put your credit card payments on pause. 

• Possible credit impacts. Forbearance typically doesn’t hurt your credit. However, future lenders can see that you've been in forbearance, and might assume you're having financial trouble even after you've straightened things out. 

• Limited new credit. If a future lender realizes you've been in forbearance, it may be less willing to extend credit. It may even view your credit application as high-risk. Before going into forbearance, consider whether you're planning to apply for new credit in the near future.

How to Apply for Credit Card Forbearance: A Step-by-Step Guide

Once you decide that credit card forbearance is right for you, the next step is applying. Here's how.

1. Check your finances

Take one last look at your budget. Make sure there's not another option that would work better for you, like adjusting your spending (even temporarily), getting a second job, or looking into debt consolidation. 

2. Call your credit card company

Contact your credit card issuer. You'll find their phone number on the back of your credit card, on your credit card statement, or on their website. Explain what you're up against financially, and ask about forbearance. A representative from your credit card company should be able to explain your options. If there’s anything you don’t understand, ask for clarification.

3. Get your documents ready

You can never be 100% sure what a credit card company will ask to see when you request forbearance. It’s a good idea to have proof of your financial situation and hardship. For example, if your financial difficulty stems from job loss, you might include a termination or layoff letter. If it's due to an unexpected medical expense or illness, gather copies of hospital bills. The faster you provide documentation to them, the faster they can process your request. 

4. Understand the terms

There are no universal credit card forbearance rules. Each credit card company can decide what its program looks like. For this reason, make sure you fully understand the details of your credit card forbearance program by asking the representative to spell them out for you. 

You'll want to know how long the forbearance will last and how interest will be handled. Also ask how much your payments will be after the forbearance ends, so you're prepared to resume when the time comes. 

5. Get it in writing

Once you agree to credit card forbearance, ask for a written copy of the agreement. This document should outline the details of your forbearance program, and serves as an official record of your agreement with the credit card company.

6. Stay in touch

Keep the lines of communication open with your credit card company. If your financial situation changes for the better, give your credit card company a call to let them know. It could work to your benefit to start making regular payments again. Or, maybe another emergency has arisen and you find yourself struggling. That, too, is something to tell your credit card company. They may have other ways to help.

7. Plan for the end of forbearance

Forbearance doesn’t last forever, so plan ahead. Factor credit card payments into your budget so you’re prepared to make them once the forbearance ends. Remember to account for accrued interest if that’s part of the deal. You can call your credit card company and ask what your first monthly payment will be after forbearance. 

8. Monitor your credit report

Forbearance isn't the same thing as late credit card payments. Late payments are typically reported to the credit bureaus, and can damage your credit score. Forbearance is something your credit card company agrees to, and it shouldn’t be held against you from a credit-reporting perspective. Check your credit report during and after forbearance to make sure this is the case. You can order free weekly online credit reports from the three major credit bureaus by visiting AnnualCreditReport.com.

Consider Other Debt Relief Options 

While credit card forbearance can be one way to get help in a sticky financial situation, it’s not the only option. You may also benefit from other solutions, such as:

• Debt settlement.  When you’re overwhelmed with debt and don’t see a way out, debt settlement could help you significantly reduce what you owe. It involves negotiating with creditors and asking them to accept a lower amount as payment in full. You can try to negotiate on your own behalf or work with a debt settlement company.

• Credit counseling. Working with a credit counselor could help you get a handle on your budget and create a plan to deal with your debt. Your counselor might recommend a structured repayment plan that they could manage for you.

• Bankruptcy. Bankruptcy is a legal process for dealing with debt. If you qualify, you could walk away from certain debts. 

No matter your situation, understanding your debt solution options can help you make the best choice.