Before Taking Help from your Credit Card, make sure you Understand the Risk

The 2007/08 mortgage crisis brought about many legislative changes which impacted the finances and lives of millions of consumers throughout the U.S. What we are seeing today has several similar undertones consumers need to be aware and wary of. 

Banks and credit card companies claim to offer “help” to consumers who have been impacted by the COVID-19 virus. However; if history repeats itself as it is known to do, people need to be aware of the devil in the details. The actions you choose to take today will impact your livelihood, your finances, your credit and your sanity tomorrow. 

Line of credit Increase

Beware the line of credit increase offer. If you are in need of assistance you have either lost your job or had a reduction of pay or hours. What you cannot pay today, you likely will not be able to pay tomorrow or next month. How would charging more on your credit card help you in the near future? Raising your line of credit does not mean the banks agree to suspend your payments. You still need to make your monthly payment or it is likely going to affect your credit.

The line of credit increase is only temporary. Your card issuer will eventually put your line of credit back to the original amount. If you used that additional credit line, the chances are high your credit card company will come after you for the difference, and they will want it in full immediately. If they issuer does not expect the over limit payment in full, they will charge over limit and other fees to your balance.

In addition, if history repeats itself, the card issuers may lower your credit limit to an even lower amount prior to your credit being raised.

Lower Interest Rates

The lower interest rate would be the better solution if this is the best these banks worth multi billions of dollars have to offer to their customers during a crisis. God forbid they actually do anything worthwhile. But I digress. The lower interest rate should at minimum lower your monthly payment, allowing the balance to be knocked down quicker. 

Skipped Payments

From what we have seen at your850, banks and credit card issuers who are offering the skipped payments are not putting the details in writing. We are uncertain if the skipped payments will be due in full as a balloon payment on a certain recent date, if the customer will still be able to use their credit card, or if these missed payments will be reported to the credit reporting agencies. We will continue monitoring these and post them here when they become available. Either way, your850 will be here to help you with questions or fight the banks on your behalf when you need.

Collection Forbearance

Collection forbearance options in the credit world is an ambiguous statement. This means either they will stop all “collection activities” on accounts that are already past due. Or they will not collect the current payment if you so “qualify”. However; we are still unable to get any direct answers from any of the credit card issuers as of yet. 

No Additional Interest

When your credit card issuer offers to not charge you any additional interest, this means you will not be charged additional interest on the carry over payment. Minimum payments vary depending on your interest rate and the balance on your card. If you have a credit card with a current balance of $20,000 with a 27% interest, the interest you would be charged is approximately $300.00. 

I guess something is better than nothing. 


About The Author

your850 has the experience and expertise to truly help people with any credit problem or crisis they may be facing.
Mortgages and COVID-19Are your Credit Cards Really Helping You During the COVID-19 Crisis
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