Keeping up on your bills is necessary regardless of whether or not you are employed. There are consequences if you just stop paying credit card companies, but there are some alternate solutions.
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Being unemployed can affect every facet of your life, especially your finances. Losing your main source of income is a staggering blow. However, debt must be repaid, regardless of whom the creditors may be.
How do I know which bills to pay?
Knowing which bills to pay and which can be put on temporary hold can be the key to financial survival. Paying the mortgage and heating bills should always take precedence over paying something such as the cable bill. When looking for ways to cut back on spending, you will need to decide what you can (and cannot) live without.
Nothing can put things into perspective like a good old-fashioned list. Start by gathering all of your monthly expenses. You may not have tracked every penny when you had an income, but now it is important to be as diligent as ever in being able to account for every penny of your spending.
Prioritize the list with the most important expenses on top and the least important ones closer to the bottom. You cannot find ways to curb your spending if you do not know where your money is going. Credit card payments should usually end up somewhere in the middle of the list.
Should I continue paying my credit cards while unemployed?
As a rule, you should always have enough funds in your savings account to cover all of your expenses for at least three months in case of financial emergencies. But if you do not, your best bet would be to pay the most essential bills first (mortgage, car, insurance, heat, etc.) and contact the other creditors to arrange a suitable alternative.
Credit card companies want your money. They do not want you to miss a payment any more than you do. Sometimes, they may offer to defer your payments, waive late fees, re-establish a payment schedule, or lower your monthly payment. All of these routes could be extremely helpful to avoid late payments and hits on your credit rating, so it is in your best interest to try to negotiate with credit card companies if all possible.
According to the Fair Credit Reporting Act, you are guaranteed a free credit report from the three main credit-reporting companies. AnnualCreditReport.com is the only source that is authorized by law to offer a free credit report per person on an annual basis.
What are some of my options of paying my credit card balance?
Another suggestion is to request your credit card company lower your credit card interest rate. If you have a decent payment history, most credit card companies are willing to lower it if possible.
A credit card balance transfer is another way to go that could help to stretch your precarious dollar. If you have multiple credit cards, contemplate transferring the balances of the other cards to the credit card with the lowest interest rate. There could be a transfer fee, but that fee could be worthwhile if it lowers your total monthly payment.
Some credit cards offer cash back or reward points. Use the cash back rewards towards the next monthly payment.
Are there consequences for not paying my credit cards bills?
Any type of late payment can negatively affect your credit score. However, this may be a hit worth taking in order to keep other more important payments up to date such as the rent or car payment. Being homeless and without transportation to and from a new job site is worse than losing a few points on your credit score.
Be sure to call your credit card lenders and explain that you are unemployed so that it can be noted into your account. Some companies are willing to work out a delayed payment schedule until you get back on your feet. It is better for them to be informed that you can’t pay your credit card bill at this time rather than you are simply unwilling or irresponsible.
Never tap into your retirement funds in order to pay a credit card bill. The associated fees and taxes for early withdrawal can hurt more than a help.
According to the Federal Trade Commission, your credit information can be used as reference information when you apply for things such as credit cards, insurance, and even some types of employment. If you are already unemployed, you might not want a bad credit score to prevent you from gaining new employment.
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