Welcome to the 1st FLA Guest Blog Post! Today we explore what you should do with credit card debt when you are laid off. Thank you to Bethaine from Debt Consolidation US for sharing these helpful answers to a frequently asked question.
She freely shares her magical money secrets to climb out of debt – which really aren’t too magical or secretive – that helped her build her net worth tremendously.
What Should You Do with Credit Card Debt When You Are Laid Off?
The first and most important matter is you need a good survival plan immediately when you are laid off and need to cope with the credit card debt.
In the case of the ‘Layoff’ scenario, the importance of a good survival plan is very necessary. Usually, the layoff order does not give you enough time to control your finances.
For the present condition, your goal must be to chalk out a survival plan for you and your family until you get a new job again. Along with it, you must check yourself from falling into a huge debt hole and take care of your credit score as well.
In this article, the intention is to brainstorm a plan for you so that you can survive your layoff as well as cope with your credit card debt.
1. You Can Pay Off Just the Minimum Amount Now
Usually, it is a bad idea to pay off the minimum amount on your credit card debt. Nonetheless, this idea will work for you when you no longer have a job.
Thus, the better option for you will be to pay off the minimum amount rather than paying almost nothing.
If you pay nothing, then the credit card companies may charge penalties, fees, and fines against you and it will most likely negatively affect your credit score.
It will be better for you to pay off at least the minimum amount for now. Further down the line when you can generate steady income again, you can then pay off more than the minimum amount.
By this strategy, you can salvage your credit score, get protection from late fees and fines, and won’t get any pesky calls from debt collection agencies.
2. You Can Negotiate an Agreement with Your Credit Card Firm
People often forget: everything is negotiable. After all, exchange of money is just a barter system.
You may contact your credit card firm and state your case to their representative regarding your present financial condition.
Nowadays, overseeing the current COVID-19 situation, many credit card companies are offering special assistance programs for those who are laid off due to Coronavirus.
With the special assistance program, you can come into an agreement with your credit card firm so that you can skip the monthly payment for a few months, waive your credit card interest and you may get other benefits also.
You have to get in touch with the credit card firm to get the special assistance that is only available in the pandemic time period.
3. You Should Try to Create a Family Budget and Continue Your Daily Expenses According to It
Creating a strict family budget and continuing your daily expenses according to the budget, can be a useful way to cope with credit card debt.
A strict family budget will decide for you what you need in your life now and where you can stop spending. This may, in turn, prove that some of your superfluous spending is surprisingly a luxury for you.
A budget may help you with some extra saved dollars that you can use to pay at least the minimum amount every month of your credit card debt.
4. You Can Consider the Credit Card Debt Consolidation Option to Tackle the Debt Burden
You can easily opt for the credit card debt consolidation to consolidate or merge all your credit card debts and make it into a single payment.
The balance transfer card can be another option for you that you can choose. You can transfer all your credit card dues to the balance transfer card.
With a balance transfer card, you may get a 0% interest promotional offer for 6 months to 18 months. You have to pay off your credit card dues with the benefit of a 0% interest rate and that is within 12 to 18 months.
Therefore, you can repay a major portion of your outstanding balance without paying any interest rate.
Thus, you can apply either the credit card debt consolidation method or the balance transfer card method to repay your credit card debt when you’re going through the inauspicious layoff situation.
5. The Wise Decision Will be to Shun Using Credit Cards for a While and Use the Cash Payment Option
In normal times, people use credit cards more than cash payment because, with credit card buying, you may get several rewards and points that are not possible with normal cash payment options.
But this restriction-free-buying mode has a negative side too. With the lure of rewards and offers, we sometimes spend more balance than our given necessity.
The ultimate result is you have to bear the debt burden on your shoulders.
So, when you are out of a job and your earning avenues are limited, return to the traditional cash-payment method.
It will keep you within a spending limit and you’ll be saved from any type of additional credit card debt burden.
These are the 5 ways that you can choose to take action when you are unemployed, concerned about your retirement, and the stress of how to repay your credit card debt is gulping you.
What Can Be Your Last Resort If You Are Completely Unable to Pay Off Your Credit Card Bill?
According to financial experts, when you are unemployed and don’t have enough savings even for paying off the minimum credit card amount, you can opt for the bankruptcy option.
You may get some immediate relief by choosing the bankruptcy option, but experts always recommend using the bankruptcy option as your last resort.
You may file bankruptcy under Chapter 7 and Chapter 13 under the bankruptcy act, but beware of the negative effect because bankruptcy may damage your credit for the long-term.
The best option is at least you should try to pay off the minimum amount on your credit card debt. At this fundamental point, you can avoid any late fee charges, penalties, etc. You should not try to avail of the bankruptcy option as your first option. Later when your financial situation will improve again, the best course of action is to try and pay off your credit card debt in the standard way.
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