Advantages and Disadvantages of Credit Card Hardship Plans

(STL.News) If you’re having trouble making monthly payments on your credit cards or feeling overwhelmed with how much you owe, you may be wondering what your options are. One approach you might consider is a credit card hardship plan. This type of debt relief program is also sometimes called forbearance.

What is a hardship plan?

A credit card hardship plan is an agreement between you and the credit card issuer to work out the terms of your payment agreement when you need help with your debt.

These have become more common as more and more people are finding it difficult lately to meet the original terms they agreed to when accepting credit cards. These plans can help lower your monthly payments and interest rates. They may even suspend your payments for a while to help you get your finances in order.

Advantages of the hardship plan

One of the biggest benefits of a credit card hardship plan is that your interest rate can be reduced. Over time, this can save you thousands of dollars, but in the short term, it will lower your monthly payments. It won’t completely eliminate interest, but even with a 1-2% drop in the rate, you’ll save money and your payments will be more affordable.

Another pro is your credit score probably won’t be affected by a credit card plan in the event of hardship. You’ll make monthly payments to the company based on your renegotiated agreement, so there won’t be any late payments on your credit report.

You will also not accrue fees for late payments. Late fees can add up over time, sometimes even pushing you over your credit limit. They can make your monthly payment much higher than before, and if you’re already struggling to pay it, these fees can make it even harder. Credit card hardship plans can end these charges, as long as you make the new monthly payment on time.

Your monthly payment is reduced is a huge advantage for credit card hardship plans. Credit card companies sometimes accept up to six months of reduced payments. The money you save can be applied to other debts, helping you pay your bills much faster.

You can learn more about it at

The disadvantages of the hardship plan

Credit card hardship plans may seem like the perfect way to improve your financial situation, but there are some downsides to consider. Some companies make it difficult to access these programs and you may not be able to take advantage of them if you are not already late.

Even though the credit card company may lower your interest rate, your account will continue to accrue interest, just at the lower rate. This could make it harder to pay off what you owe when you start making full payments again, because your balance will be higher.

Credit card companies may also choose to reduce your credit limit while you are in the credit card hardship plan. This isn’t always a bad thing, but if you need your card in an emergency, you may not have the funds available. Check with your card issuer to see if they lower your credit limit when you have a hardship credit card plan.

If working with your credit card companies seems overwhelming or you can’t reach an agreement, another good option is to check out debt relief programs. Freedom Debt Relief can help you take control of your finances and make your debt more manageable. They offer free, risk-free consultations and have resolved over $10 billion in debt since 2002.