A CLOSER LOOK: COVID-19 & personal credit concerns

A Closer Look

ARKANSAS (KNWA/KFTA) — COVID-19 has caused a health crisis and, for many, a financial crisis.

In Arkansas, nearly 200,000 people have filed for unemployment since mid-March, according to the Department of Labor. This number does not include Arkansans who have filed for relief under the temporary federal Pandemic Unemployment Assistance (PUA) program.

The state’s unemployment rate in April was 10.2% because of the new coronavirus.

For people who are out of work, or furloughed, financial stress comes into play. How do you afford to cover expenses such as rent, mortgage, credit cards, and medical bills? What’s left over to buy food and other essentials?

Here are examples of some companies offering debt relief programs

American Express has created a “Coronavirus Support” hub that includes advice spanning several topics from managing your account to support for business owners, and many other issuers have done the same.

American Express has also extended its welcome offer periods for cardholders who applied and were approved between December 1, 2019 and May 31, 2020 by three months. This means if you initially had to hit a spending threshold within three months to secure your bonus, you now have six months to do so. 

Other examples of relief efforts put in place include deferred payments, waived late fees, collections forbearance, and payment assistance for credit cards and loans.

Many account holders are getting assistance on a case-by-case basis. This can be done online or on the phone, but as a heads-up, phone wait times can be long. Again, contact your issuers directly.

PAYING RENT WITH A CREDIT CARD

Landlords don’t usually accept credit cards as a form of payment, but if the pandemic has put you behind financially and you want to stay on top of your rent before getting back on your feet financially, the ability to use a credit card to pay a month’s rent could be helpful.

Here is one option. Third-party services such as Plastiq allow you to use a credit card for transactions that normally don’t allow you to do so. Payment is sent via check or wire transfer to your landlord, and you can use a credit card to pay the third-party service. Plastiq has the lowest fees of all the apps that might allow you to pay with a credit card and sometimes offers further discounts through promotions. 

CANCELING TRAVEL PLANS

Most airline policies are offering vouchers for future travel instead of refunding customers, but contact the airline you bought tickets through to confirm its approach. 

Some travel credit cards have their own travel insurance benefits. The travel insurance option that might prove most useful in these cases is trip cancellation insurance. Trip cancellation insurance covers the cost of canceling travel arrangements before you leave. It usually reimburses non-refundable travel expenses like airfare, hotels, and activities. 

If you’re only canceling a trip because you’re concerned about COVID-19, and the flight is still scheduled, it’s unlikely to be covered. However, if your flight is canceled by the airline and it isn’t honoring a refund, your trip cancellation insurance will likely cover you if you paid for the tickets with the credit card offering the benefit.

The time it takes to be refunded varies by issuer, and likely on a case-by-case basis, too. Your best bet is to review the terms of your cards travel insurance policy or contact the issuer directly to find out.

DO’S AND DON’TS WITH YOUR CREDIT

Always aim to pay your full credit card balance in full by the due date to avoid interest charges. If you can’t knock out your balances in full, pay as much as you can over the minimum amount due.

Don’t make any late payments — they can remain on your credit reports for up to seven years.

If times have gotten tough due to the pandemic, and you can’t even pay the minimum, contact your issuer directly to see if they have any kind of relief program in place for those affected by COVID-19.

Don’t lean on credit cards too heavily. Avoid using a credit card for something you know you can’t pay off in full by the next due date. Not only will you save money on interest fees every month by doing this, but it will keep your credit utilization lower, that is, the ratio of your balances to your credit limits, which is a factor that goes into your credit scores.

LEGITIMATE CREDIT CARD OFFER VS SCAM OFFER

Is consolidating credit card debt to one card, is that a good deal? Is reading the fine print important?

Transferring a high-interest credit card debt to a credit card with a lower interest rate or a 0% introductory offer can be a helpful way to pay off an existing debt interest-free over time. Consolidating multiple debts into a single, more easily manageable payment by applying for a personal loan can help as well, especially since personal loans usually have lower interest rates than credit cards.

However, both of these options are highly dependent on your credit history and income in order to be approved, so don’t rely on them as a saving grace from financial stress during the pandemic.

You shouldn’t have to worry about being scammed by any legitimate credit card offers that issuers have out there, but reading the terms carefully and reassessing your own credit situation is imperative before applying for any new credit.

(Editor’s note: Some of the information was gathered from CreditCardInsider.com and Senior Credit Analyst Nathan Grant.)

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