When Can You Use a Credit Card Forbearance Program?

When Can You Use a Credit Card Forbearance Program?
Key Takeaways:
  • Forbearance offers a way to skip payments for now
  • Programs vary by ‌card issuer, so find out how yours works
  • Credit card forbearance offers temporary relief from debts

Keeping up with bills during times of financial hardship can feel overwhelming. Minimum payments add up, and you might be unsure how to meet your obligations. The good news is that help might be available through credit card forbearance.

Credit card forbearance can offer short-term relief from some of your bills and allow you breathing 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 practice that allows you to skip your debt payments for a set period. It’s not just for credit cards. Other loans might also have forbearance programs. Student loans, mortgages, personal loans, and auto loans can be deferred through forbearance programs.

Credit card forbearance might also include lower payments instead of skipped payments. Some forbearance or financial hardship programs waive some of your interest, late fees, or other charges. You might also get a 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 issuer has its own guidelines. That’s why it’s important to read the agreement and make sure you understand the terms before agreeing to a forbearance program. 

How does credit card forbearance work?

With credit card forbearance, you 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. Because Covid-19 still impacts many people, some credit card issuers still offer programs for those affected.

To access credit card forbearance, tell your creditor that you’re facing hardship. The card issuer can then decide whether you qualify for forbearance. Depending on your situation and the program, some actions you might be eligible for include:

  • Pause in payments for a specific time, usually 12 mos.

  • Lower minimum payment

  • Fee waivers for previously late or skipped payments

  • Lower interest rate

Depending on the program, interest might continue to accrue on your balance. Some credit issuers pause interest charges while you’re in forbearance, but others will keep adding interest. If that happens, you'll owe more at the end of your forbearance, even if you didn’t spend more on the credit card.

Finally, some creditors will allow you to keep using the card while you’re in forbearance, but others won’t.

At the end of the forbearance period, your credit card terms return to their “normal” levels. Your interest rate and minimum payment go higher. You’ll need a plan to tackle the debt at the end of your forbearance period.

When to use credit card forbearance (and when not to)

Credit card forbearance can work well if your situation is short-term and you need some breathing room. However, it’s not the right move for everyone.

When to use 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 might need to make smaller payments for a time due to a change in circumstances.

When to avoid credit card forbearance

  • A long-term issue might call for a different approach.

  • You’re worried about added 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.

Consider other debt-relief options 

While forbearance can be one way to get help out of a sticky financial situation, it’s not the only option available. While credit card forbearance provides temporary relief, you might also benefit from other debt solutions.

  • Debt consolidation: Get all your debts under one umbrella. You make one payment each month. Depending on the situation, your total monthly payment might go down with debt consolidation, providing a way to manage your debt.

  • Debt settlement: When overwhelmed, debt settlement can help you get out of debt for less than you owe. It’s a process where you offer your credit card issuers less than you owe, and they accept it as full payment.  

  • 0% APR balance transfer: You can move your credit card balances to a new credit card with a promotional interest rate. Since you’re not accruing interest, every penny you pay reduces your balance.

  • Credit counseling: Working with a credit counselor can help you improve your budget and create a debt management plan. Depending on your situation, credit counseling can help you use various tools to get out of debt.

  • Bankruptcy: Bankruptcy is the right solution in some situations. If you’re choosing between debt relief and bankruptcy, it mostly comes down to a financial decision. It’s not a moral failing.

No matter your situation, there are debt relief options that might work for you. Understanding your debt solution options can help you make the best choice.

Frequently Asked Questions

Will credit card companies let you defer payment?

Yes, some credit card companies will let you skip payments for a time. However, it’s important to understand the terms. In some cases, you might still incur interest. That interest would add to your balance.

Does forbearance ruin your credit?

Whether forbearance ruins your credit depends on the terms of the program and how your credit card issuer reports to the credit reporting agency. Get the forbearance terms in writing, and check to find out if the creditor reports your account as “paid as agreed” during your forbearance period. If your credit card issuer still reports your payments as missed or below the minimum payment amount, your credit score could suffer. If your payments are “paid as agreed,” you’re less likely to experience a big drop in your credit score.

Do banks still offer coronavirus credit card relief?

Some lenders might still be offering Covid-19 relief programs. However, if you’re experiencing financial hardship for any reason, you might be able to access credit card forbearance or another debt relief option.