This is the first in a three-part weekly series of Next Steps When You’re In Credit Trouble. This week we tackle the question: What should you do if you can’t pay your credit card bills this month?
Everyone has a difficult financial month from time to time. If you find yourself struggling to pay your credit card bills this month, there are a few things you can do to minimize the damage on your financial future. When you can’t make your monthly credit card payment, the absolute worst thing you can do is just let the bill go unpaid. Your creditor can take certain actions like charging you a late fee or reporting the late payment to the credit bureaus if it goes 30 days past due.
First, do no harm…
It’s easy for one missed payment to snowball into numerous missed payments, a default account and possibly a call from a collection agency. Before this happens, consider in the very least paying the minimum on your credit cards this month. Paying just the minimum payment will help you avoid paying a late fee on the card and dodge a late payment notice on your credit report.
When a little isn’t enough
It’s a widespread myth that it’s ok to pay what you can, even if it’s less than the minimum payment. This is simply not true. You can’t just send a $10 payment to your creditor and expect them to understand that you’re having trouble this month. Find out what the minimum payment is and try to make it.
Get your priorities straight
If you’re having a rocky month financially, it’s time to decide which bills you’re going to pay now and which are going to have to wait. Go through your list of monthly expenses, and mark all items that are vital to your existence as a top priority. This includes things like your rent/mortgage, utilities and insurance. Mark all secured debts as your next priority. This includes things like car loans, home equity loans and any other debts that have collateral attached to them and enthusiastic bill collectors waiting to pounce. Mark all unsecured debts as your last priority. This includes things like credit card debt, personal loans and most services-related bills. Once you’ve prioritized all of your bills, make a list of the bills that you aren’t going to be able to pay right away.
Stick with the essentials
Go over your list of expenses and cancel anything that isn’t key to your survival. Cable/satellite, streaming services, newspaper subscriptions, extra phone features, paid memberships —they all need to go until you have your finances back on track and can keep collection agencies at bay.
Scare up the money
Late payments and skipped payments are bad news for your financial health, so make a hard push to earn the money that you need to cover your budget gap. Sell some stuff, pick up a side job, roll coins—do anything you can to pay your bills on time and avoid bill collectors.
Talk to your creditor
Still can’t pay anything this month? Call your card issuer and explain the situation to them. Let them know it’s a one-time occurrence and set up a plan for when you’ll be able to make your next payment. Some creditors will extend your due date, waive the late fee, and continue reporting a “current” payment status to credit bureaus. This will help you avoid continuous bill collector calls and further action by collection agencies. When you contact your credit card company calmly explain the situation. Being polite and respectful on the phone will help you more than yelling and screaming. If you need to keep asking for a manger until you speak to someone that can help your situation. Be persistent.
Get ready for next month
Once you have determined how much you have available you should call and talk to your creditors or anyone that you are behind with. Many bill collectors will be able to work out a payment plan with you, in order to help you get caught up. In fact, you should try calling if you are afraid that you are going to fall behind. There is a lot that they can do to help if you communicate with them. You can make real changes to your financial picture with discipline and hard work. It is important to start taking steps so that you are not just surviving, but thriving financially. Look at your entire financial picture and get serious about budgeting to see what else you need to do to change the situation.
Next week we continue with the second installment of our 3-part series: What you should do if you are several months behind on your bills?