laid off + credit cards

February 23, 2009 5:06 AM

I just got laid off on Friday. I filed for unemployment benefits. The next step is to call the credit card companies and tell them I have no money for them this month and don't know when I can resume payments. Any suggestions how to go about this.
posted by hophead627 to work & money (9 comments total)

I'm very sorry for your bad news but are you sure you instantly want to stop paying your credit cards with all the headaches that is going to provoke? why not give us a better idea of your finances and see if someone else sees another opening? I ask because credit card debt is bad debt and as such the one you generally want to get rid off first. did you get a severance?

as far as calling them is concerned - a piece on npr's 'day to day' last week or so suggested that by telling them that it was a tight month and they needed a break some people did in fact get notable concessions. I'd just try calling and being nice. you know, I really want to pay and keep a good history with you guys but things are tight this month, can we work something out? a bit more time?

consider checking out the credit boards, too.
posted by krautland at 5:27 AM on February 23 [1 favorite]

I have heard of people getting significant reductions in credit card payments, but I wouldn't call saying you can't pay anything. The people I have heard being most successful called, said they were laid off and asked to set up a special payment plan. They claimed that you might have to negotiate a little bit, so start with $25/month if your target amount is $50/month. And then, if you get a special agreement, BE SURE TO PAY ON TIME. Also, have them mail you a copy of the agreement for your records, and if you can, stop using the cards.

I know it seems like you can't pay them anything, but making an agreement to send them a few dollars every month will keep your existing debt from becoming out of control when they bump your interest rate through the roof for non-payment and will be worth it in the long run. Good luck!
posted by mjcon at 7:33 AM on February 23

Yes - a payment plan is better than no payments.
posted by Pants! at 8:00 AM on February 23

Definitely, just call them. I was dumbfounded by how accomodating my Visa carrier was, even after I'd been hiding from them for months. Don't wait forever like I did. Call customer service and ask to speak with someone about payment plans.

(I don't work for the CCs; but actually getting human sympathy and a break on my payments was truly uplifting. I cried afterwards, actually.)
posted by orrnyereg at 8:40 AM on February 23

[Used to work in customer service for a credit card.]

Definitely call them. Just say what you've said here--I've lost my job, and I'm not going to be able to make the minimum payments this month. Is there some way that I can have my interest rate and minimum monthly payment reduced?

Make sure to ask about the interest rate--first because lower interest rates are always good, but second because nothing sucks more than getting a job in nine months and realizing that your balance has actually gone *up* by a hundred fifty bucks a month. (Sounds weird, but then you realize that you're paying, say, 17% interest on a 10K balance, and you're only paying $100 a month, which won't even cover the monthly interest, let alone leave anything toward reducing the principal.)

It's also worth mentioning that while you should definitely call now, it's possible that your credit card will not help you with this until you've actually missed (or been late on) a payment. Counterintuitive, yes, but when I was doing this (six years ago, to be fair) we weren't able to do anything for people until they'd actually missed. They could be a single day late, and then we could get them on a payment plan, but until then, nothing. So prepare yourself for the idea that you might have to call back in a few weeks and have this conversation again.

With that said, no one's going to be nasty to you, and no one's going to try to harass you. You're showing them that you want to make good on this debt, and they want you to do that. Both when I was working for the CC and when I've had to make calls like this in my own life, I've never seen anyone be anything but nice about it.

You're doing the right thing. It won't be nearly as bad as you think that it is. Many, many people are in your position right now, and credit card companies get calls like this all the time. It'll be okay.
posted by MeghanC at 9:17 AM on February 23 [4 favorites]

Addendum: It might be worth figuring out ahead of time how much you can pay. Can you manage $50 a month? $200? Know that when you call in, because they'll probably ask you, and you want to have a number for them.
posted by MeghanC at 9:19 AM on February 23

@MeghanC - Anything else you can share? I'd to hear any dealing-with-credit-card-company tips.

I have been hearing complaints very recently about people trying to work something out with credit card company and the card company instantly raising their interest rate or lowering their credit because they're having trouble paying up. Any truth to this? Suze Orman was one of the people who was talking about this, last week or so.
posted by semacd at 10:44 AM on February 23

If you have a line of credit from your bank, it might be better to use that to pay off your credit card debts as much as possible as the interest rate from the bank will be so much lower than any credit card.
posted by Penelope at 11:05 AM on February 23

@semacd -- With the disclaimer that I was doing this six years ago, well before the current economic crisis, I'm glad to try to answer questions.

Regarding companies raising the interest rate on people who can't pay, this is sometimes true. In my experience--and this is my experience as a consumer and a person who spends a fair bit of time trying to help friends with this stuff--the raised interest rate generally happens if one or more payments are late or missed and there's no attempt on the part of the consumer to deal with the issue. So if you're dodging Visa's calls and not making your payments, many card issuers have it in their fine print that they'll increase your interest rate.

Also, many times when there's a payment plan, further use of the card will be frozen. Sometimes this will mean they drop your credit to zero (which is bad for your credit score) and other times (more commonly) it means that they simply freeze the account and don't allow any further charges. Now that you've mentioned this, I don't know that I've ever seen someone be put on a payment plan and retain the ability to use their card. Obvious reasons, I suppose--if you can't make payments on a $5000 bill, and you're unemployed, they don't want to let you run up another $5000 in charges.

I think that both of the things that you've mentioned can and do happen, though the former with rather less frequency than the latter. Not staying in touch with the company and just not paying will quite probably result in both things happening--calling early and discussing it means that you'll probably avoid the raised interest, if not the card freeze.

Again, though, this information is from some years ago, and things may be different now.
posted by MeghanC at 11:09 AM on February 23