While the economy is improving, millions of Americans will experience job loss at some point in their lives. Sadly, even if you lose your income, you will not lose your expenses, and there is no magic spell that will dispel your bills. However, there are some steps that you can take to help minimize your credit card debt.
Contact Your Credit Card Company
If you lose your job, contact your credit card issuer immediately to explain your situation. If you tell them that you have lost your job, they may be able to offer some relief. If you are proactive and talk to them before there is a problem, they may be more apt to help.
Keep Making Minimum Payments
Make sure you continue to make the minimum payment on your credit card so you do not incur penalty fees and do not damage your credit score. Since you no longer have a reliable income, you may not want to make larger payments to pay down debt. Instead, start an emergency savings fund.
Decrease Spending
You will want to start spending less and switch to cash. If your income decreases or stops completely, you will need to revisit your budget to see where you can cut expenses. Also, if you start to pay with cash, you will be more aware of how much you are spending, which may help you think twice about whether the purchase is necessary.
Do NOT Replace Your Salary with a Credit Card
You cannot think of your credit card as an easy way to get cash. If you stop using your credit card, you will not accumulate any more debt, which will stop you from ruining your credit score. If you cannot afford to pay cash for something, you certainly cannot afford the interest payments.
Avoid Cash Advances
While cash advances may be a fast and easy way to access funds, they charge high fees and interest rates. In fact, some cards charge up to 25% APR on cash advances.
Research Hardship Programs
Some financial institutions offer hardship programs for lost work, severe injuries or a death in the family. You may qualify to have part of your balance forgiven, or the bank may let you delay your payments while you look for work.