If you suddenly become unemployed and you have outstanding credit on your credit cards, what can you do to keep up payments?
First you’ll need to sit down and figure out your new budget, based on unemployment payments etc. Next you’ll have to prioritize payments to your creditors. The golden rule is that before paying any credit card, ensure you pay your mortgage or rent on time. Utility bills will also often have a higher priority than credit card commitments. Also, if you have court fines these too must be paid.
Assuming you have any cash left after servicing all your financial commitments, you can turn to the task of paying off your credit cards. The important thing is not to increase any credit owed. It might also be prudent to cut up any credit cards you may have to avoid temptation to spend even more and increase your debts further.
If you have enough spare cash let to pay your credit cards in full, then all well and good. It is more likely at best you’ll only be able to make the minimum payment. If this is the case, then you’ll need to understand your overall debt will only come down by a fraction each month. However, your minimum repayments too will slowly fall over time saving money. That said, this isn’t an ideal situation. To make any inroads into your credit card debts, you’ll need to consider paying more than the minimum amount, which may only amount to 2 or 3 percent of the total amount owed. If you can pay more than the minimum amount each month, your debt will fall faster, and you will end up paying less interest. This will save you money.
The third scenario is you don’t have enough money even to pay the minimum monthly balance in full on your credit cards. If this is the case and you are prepared to pay something, contact the card provider and explain the situation. This is a particularly useful approach if you think you may soon be back in work. This is because you may be able to negotiate an a new rate, interest free holiday or suspension of monthly repayments.
Lastly, if you are really snowed under it still pays to pay something off of your credit cards. If you have multiple cards, then try to make a deal with them all so you have a single payment to make each month until you get back on your feet again.