Illustration of a credit card turned into a jigsaw puzzle
Photo: The Voorhes

Many Americans are worrying about being able to pay their credit card bills. The good news is that credit card issuers are offering accommodations to customers who need relief. Use our guide to these services—with important caveats—as well as other strategies to help you manage your credit card debt more effectively. Some of these steps may be worth considering even if you’re not having trouble paying your credit card bills.

1. Ask Your Credit Card Company Questions

Though the Coronavirus Aid, Relief and Economic Security Act, passed by Congress in March, does not require them to, many card issuers are working with customers to, among other things, allow deferred payments, reduce or waive annual fees, and reduce or suspend interest charges, all for a defined period of time. Decisions are generally made on an individual basis. (In the case of deferred payments, interest will often continue to accrue. Check with your credit card issuer.)

In a survey conducted in April by LendingTree, 91 percent of consumers who requested a break on their monthly credit card payments because of coronavirus-related circumstances reported that they got one. Under the coronavirus relief law, a cardholder’s credit score can’t be negatively affected if he or she meets the terms of the new payment agreement reached with the credit card company.

More on Personal Finance & the Coronavirus

The key, experts say, is to be proactive. “You need to contact the credit card company to request an accommodation if you want to protect your credit score,” says Ted Rossman, an industry analyst at CreditCards.com. “If you wait until you’ve already fallen behind, it’s going to be hard to unwind that damage.”

While a modified payment plan can provide relief in the short term, financial experts caution that it could also potentially create an even bigger problem once the coronavirus pandemic ends. “There’s nothing that says credit card issuers can’t call the amount you owe due in full once the accommodation expires,” says John Ulzheimer, a credit card expert, adding that any break a consumer is offered could end in a matter of months. “So before you agree to any modified payment plan, you need to ask the credit card issuer what your relationship with them is going to look like when all of this is over," he says. "Are you going to return to your normal monthly payment, or are they going to want an accelerated payback of the amount you deferred in 30 or 60 or 90 days? You want to avoid any unintended consequences on the back end.”

Consumers can protect themselves from potential disputes by keeping careful records, says Christina Tetreault, manager of financial policy at CR. “It’s critical to document all of your interactions with the company,” she says. “Keep track of who you talk to, save emails, and get everything in writing, so you’re clear about what the terms are and can prove it.”

2. Open a Balance Transfer Card

To entice people into opening a new credit card account, certain issuers allow consumers to transfer existing balances to the new card at a low or 0 percent interest rate for a limited period, often 12 to 15 months or longer. Most issuers charge a small fee to allow you to transfer balances, but even with this fee you can still save significantly by being relieved of having to pay interest charges for many months. A number of these cards also don't charge interest on new purchases for an introductory period.

“These cards effectively allow you to give yourself your own accommodation by converting interest-accruing debt into interest-free debt,” Ulzheimer says. Rossman says that balance transfer cards are becoming more difficult to qualify for now and that you’re likely to need a high credit score and proof of income to get one. But a large bank you have a long-standing relationship with might be more lenient, he says. “There could also be a balance transfer promotion you’re not aware of on one of your existing cards, so be sure to check.”

3. Don’t Pay Off Cards If You Lack Cash Reserves

Many consumers make a habit of paying off their credit card balances every month to avoid interest charges. But given the precarious state of the economy and the swelling ranks of the unemployed, experts say building up cash reserves is now more important than paying off credit card debt.

“Under normal circumstances, I would be telling people to get out of credit card debt to avoid paying high interest rates,” Rossman says. “But if you need to carry debt for a while to create a three- or four-month emergency fund and preserve cash flow, that’s okay for now.” He says that using coronavirus relief checks to pay off credit card debt is an especially bad idea. “You’re better off using the money for necessities or to add to your cash reserves.”

Similarly, Chi Chi Wu, a staff attorney at the National Consumer Law Center (NCLC), says that consumers who don't have enough money to cover all their expenses should prioritize necessities before worrying about paying their credit card bills. “Your credit score is certainly not as important as keeping a roof over your head and the lights and heat and internet on,” she says. “Yes, the issuer could take you to court, but that’s unlikely to happen in the near future. Take care of necessities first.”

4. Don’t Think of Your Cards as an Emergency Fund

“During the last economic downturn, many people had their cards canceled or their credit limits cut without warning because issuers were nervous about getting paid back,” Rossman says. “That makes it dangerous to rely on credit cards as an emergency fund.”

Regularly paying on time is no guarantee you won’t be affected, Rossman says, adding that even cardholders in good standing had credit limits reduced during the 2007 to 2009 Great Recession. “Card issuers have a lot of latitude to slash credit limits without prior notice,” he says. “They can potentially even demand immediate payment of the entire outstanding debt.”

Rossman says that cards that haven't been used for an extended period are prime candidates for cancellation. To reduce the chances that a lender will close such an account, he suggests making a purchase—even a small one—with the card, then paying it off.

Tetreault says that in the current economic climate, consumers should avoid the temptation to reach for their credit cards to pay for expenses they can’t afford. “There’s a sense of urgency now, and people don’t necessarily feel they have the time to seek out alternatives to cover their bills,” she says. “But to the extent that a consumer can avoid debt and find help elsewhere, they should do that.” (See “Your Guide to Getting Cash During the Pandemic.")

According to the NCLC, consumers should never use credit cards to pay for medical debt, taxes, mortgage payments, or student loans, because better options are available to cover those types of debt. For example, there are federal and state programs that forgive hospital debt for families that meet certain criteria, but medical debt placed on a credit card isn't eligible for such relief programs. And provisions of the coronavirus relief law could allow many consumers to defer mortgage payments for up to a year. (See “How Mortgage Relief Is Supposed to Work.") For more on managing credit card debt, see the NCLC’s publication “Surviving Debt,” which is available free of charge during the coronavirus crisis at nclc.org.

5. Consider an Installment Loan Program

Some credit cards offer an installment loan feature that allows cardholders to pay for certain purchases in fixed monthly installments over a finite period of time, either for a monthly fee or at a fixed rate of interest. Examples of these are the Pay It Plan It program from American Express and the Citi Flex Loan.

“These programs use your existing credit line, but instead of carrying an open-ended balance, you’re basically transferring the debt into a personal loan with a more predictable payback and oftentimes a lower interest rate,” Rossman says. You don’t need to qualify separately for these programs, although the interest rate or service fee you’re charged is likely to be tied to your credit score. “In most cases, you won’t save as much as you would with a 0 percent interest balance transfer or a 6 percent personal loan,” Rossman says, “but you might be able lower your APR [annual percentage rate] from 16 percent to 11 percent.”

6. Don’t Cancel Your Cards

Consumers carrying cards that charge hefty annual fees may be tempted to cancel them to pocket the savings. For instance, the American Express Platinum and Chase Sapphire Reserve cards cost $550 per year and come with valuable travel perks that can’t be used when sheltering in place. But rather than canceling these cards, which can lower your credit score, experts recommend changing to a no-fee card offered by the same company.

“If your renewal is approaching, you could explain to the company that you’re not getting value from the card due to the coronavirus, and ask if it would waive at least part of the annual fee,” Rossman says. “If you’re not satisfied with their offer, switch to a no-fee card from the same issuer. When you do that, you’re typically keeping the same credit line and positive account information, so you preserve your credit score but lose the fee.”

Before you make the switch, confirm that no credit check will be done (it could also lower your credit score), that any rewards you’ve earned will transfer to the new card, and that the credit limit will remain the same or increase.

7. Open a Cash-Back Card

Americans focused on stretching their dollars even more should consider opening a cash-back card. While the terms vary, these offer a cash rebate of as much as 6 percent back on certain categories of purchases, such as gas and groceries. Others offer a flat (and usually smaller) percentage back on most any purchase. (Exclusions can include lottery tickets and gift cards.) “Cash-back cards are the unsung heroes of the credit card world,” Rossman says. “They’re not sexy, but they offer a lot of value on purchases of everyday stuff.”

The Citi Double Cash card, for instance, has no annual fee and offers 2 percent cash back on most purchases, with no cap on how much you can earn each year. The American Express Blue Cash Preferred card costs $95 per year but gives 6 percent back on up to $6,000 in groceries per year, 3 percent back on gasoline and certain transit expenses, and 1 percent back on all other purchases, and offers select card applicants an introductory bonus of as much as $300. “Some of these cards especially make sense for people whose consumption habits have changed and who find they’re buying a lot more groceries these days,” Rossman says.

Editor’s Note: This article also appeared in the July 2020 issue of Consumer Reports magazine.