Credit Card Hardship Programs
by Mr Credit CardWhat is a credit card hardship program? What can you do if you’re in one, and want to get out of it? A reader, Katherine, contacted us with this question:
A Hispanic family in our community had a tragic circumstance and they maxed out two credit card to fly their nephew from Mexico to Houston.
One credit card was 10.99% interest. I tried to intervene under a National City MasterCard Hardship Program. Last October, I was told they didn’t qualify because they hadn’t missed a payment. I told them to quit paying.
The credit card company raised their finance charge to 24%. I called to get them into the Hardship Program. I paid over $300 to get their account current. The Hardship Program is 12.6% for a year and then it will go back to 10.99%.
This is so wrong. I truly feel I am at a loss now. My help actually made things worse. This should be an illegal practice to do this to a family.
I hope I don’t have to hire an attorney for bankruptcy. Any advice? Please.
Thanks for your question Katherine. This is a tough situation, but it isn’t impossible for them to get out of it.
A credit card hardship program is basically an agreement with your credit card company. Under that agreement, you set up a payment plan, and they reduce your interest rates and sometimes lower your monthly payments. As long as you keep to the agreement, you should eventually be able to pay your account off.
Now, with the situation in question: Katherine, if you are upset because the hardship program qualified them for an interest rate that was higher than what they were paying to begin with – don’t be so hard on yourself. You were just trying to help them, which I am sure they appreciated!
So, let’s talk about what their other options are. I am assuming, because they needed a hardship agreement, that they are having trouble making their regular payments. In this situation, they have several options to try before they look at bankruptcy.
This could result in a lower balance, having the fees removed off of their credit cards, and even lower interest rates. Sometimes credit counselors can do things that you and I can’t as far as credit card negotiations. Just make sure they get to a reputable credit counselor, because there are a lot of scams out there.
For more information on how to find the right kind of credit counselor you can check out this article:
They can check on their FICO score here, and read our review of the best balance transfer credit card here.
If none of those recommendations work for them, things can still work out fine. If they can manage to stick out the hardship agreement they may pay slightly more in interest, but nothing bad will happen. It may take them a little longer to pay off their debt that way, but simply following the agreement will take care of things.
Two important things to note:
If they have to miss a payment or be late, make sure that they (or you) call the credit card company. You will need to do whatever it takes to keep that hardship agreement in effect. If you don’t then the interest rate will go right back up, and they will be worse off than before.
Second, if there are any fees (late, over the limit, etc.) on either of their cards, call and have them removed. Any money that you can take off of the total balance will only help them in the long run.
For instructions on how to call and get fees removed, you can check out any of the articles below:
- Negotiating With Your Credit Card Company To Remove Fees
- Tough Negotiations With Credit Card Companies
- Negotiating With Your Creditors When You’re Past Due
Thanks again for your question Katherine, I hope that everything gets resolved for this family.
Do you have a question? Leave a comment below!
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January 23rd, 2009 at 12:48
Katherine,
Obviously you seem to know what you are doing and you like or even trust these friends of yours. Would it be possible if they could not balance transfer to a new card you could balance transfer their card to one of yours for a lower rate. That is if you trust them enough, which I will assume you do since you have already put in so much time and money on their behalf. Just a small suggestion.
Jack
July 30th, 2009 at 22:46
I have a hardship program through BOA – I owe 14,000 (290 per month at 5%). Right now -because of other debt – just graduated from school, searching for a job (one that pays enough to pay everyone), etc …..it is incredibly hard to pay this amount. I have asked for a temporary lowering of the amount – ($150) for a few months, but they insist that they “can’t” as if their hands are tied. Where can I find the law that governs what they “can’t” do for hardship programs? I would like to know what they can and cannot do so that I can use it to negotiate. I am invested in paying off the debt and staying out of bankruptcy. Anything you can share would be much appreciated.