The credit card bills that were accumulating started to pile up. People turned to a credit card consolidation loan. Before the pandemic, Americans had a 7-year line of credit card delinquencies. So with 26 million Americans applying for new unemployment benefits, this will be even worse when the next round of data starts to pour in.
The government has instructed the credit card companies to give forbearance, which means breathing room. No fees and penalties. And that is causing problems with credit card companies themselves. Nobody feels bad for them. They know that many people won’t be able to pay off for a long period of time. So the banks that have credit cards as their main business are going to take a hit.
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With forbearance, people have a breathing room of 3 months. However, many of these companies are quite tricky. They hold their interest charges but then they are creating a balloon payment at the other end of this.
And they are also shutting down landing facilities. It means that you might have thought your credit card limit was 12,000 dollars, and the issuer might say, “well, you know it’s 5,000 dollars.” And they can do that. It’s perfectly legal. But before you start running your credit card bill, be sure to understand your limit of Indigo Apply credit card and what the rules are surrounding this forbearance period.
If you are on edge, if you are unemployed, if you’ve been negatively impacted financially by this pandemic, it’s all about conserving your cash. So you shouldn’t be in a rush to pay any debt. People want to get rid of that debt. In normal times it’s ok to pay high interest. However, these are not normal times. We are at the extreme. You’ve got to conserve your cash for a rainy day. So the time to pay off debt will be when you understand your financial condition in the next 60 to 90 days.
For now, don’t be in a rush to pay off any of your debts, conserve your cash, do prioritize your bills. There is a great tool that you can use for this. You can find it on the website of the Consumer Financial Bureau. If you google “Bill priority tool CFPB,” you’ll see it there.
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The only highest priority for you that should be right now is feeding you and your family. Everything else is negotiable. This is not the time to worry about pulling yourself out of a credit card debt. Of course, if you have a job, it seems secure, you’ve got the cash flow, and you feel you can pay off that debt, feel free to do so—the same with the student loans. There is no interest being charged on Federal student loans until September 30th.
But if you don’t have 6 to 12 months of living expenses sitting in a safe place, make that the number one priority.
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