Credit Card Hardship Programs Could Help Borrowers Avoid Default

Seeking assistance before missing multiple payments can improve the likelihood of qualifying for relief.

Borrowers struggling to keep up with rising credit card payments may qualify for hardship programs that temporarily reduce interest rates, lower monthly payments, or pause payments while they recover from financial setbacks. While these programs vary by lender, financial institutions generally offer them to help customers avoid falling behind on their accounts and ultimately defaulting, CBS News reports.

As inflation, elevated borrowing costs, and growing household debt continue to pressure household budgets, consumer finance professionals say borrowers should contact their credit card issuer as soon as financial difficulties arise. Seeking assistance before missing multiple payments can improve the likelihood of qualifying for relief.

One of the most common forms of hardship programs/ assistance is a temporary reduction in a card’s annual percentage rate, or APR. Lower interest charges allow more of each monthly payment to be applied to the principal balance rather than finance charges. Depending on the lender, reduced rates may remain in effect for several months or for up to a year. Some issuers also suspend new purchases while borrowers participate in a hardship program to prevent balances from increasing.

Lenders may also offer structured repayment plans that reduce monthly payment amounts while establishing a fixed payoff schedule. Other hardship options include temporarily waiving late fees or certain account charges, restoring a lower interest rate after a period of on-time payments, or providing short-term payment deferrals following qualifying events such as job loss, natural disasters, or major medical expenses.

Although deferred payments can provide temporary breathing room, interest often continues to accrue during the payment pause, increasing the total amount repaid over time.

For borrowers whose debt extends beyond a temporary financial setback, additional repayment strategies may be available. Nonprofit credit counseling agencies can help consumers enroll in debt management plans that consolidate payments while reducing interest rates and certain fees.

Consumers with strong credit may also qualify for balance transfer credit cards offering introductory 0% APR offers or debt-consolidation loans with lower fixed interest rates. Those experiencing severe financial hardship may consider debt settlement, though the process can temporarily damage credit and carry other financial risks.