Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."
Being unemployed can be stressful and put a strain on your finances. If you have credit card balances, most creditors expect you to make at least the minimum payment each month.
However, some credit card companies are willing to work with you and may provide special assistance programs. And your options don’t end there. Here are some key steps to follow if you find yourself unemployed with credit card debt.
- Reach out to your credit card company
- File for unemployment or other government assistance
- Adjust your budget
- Consider credit card refinancing
- Try debt consolidation
- Look into credit counseling
- Should I use my credit cards when I’m unemployed?
Reach out to your credit card company
If you’re dealing with a loss of income and can’t pay your credit card bills, your first step should be to reach out to your credit card company (or companies). Call the number on the back of your credit card and explain your situation. Then, ask if the company has any hardship programs you might be eligible for.
Hardship programs from credit card companies may help you get a temporarily lower interest rate or monthly payment to relieve some financial pressure. Some hardship programs even waive late fees or allow you to defer payments, depending on your situation. To sign up for a hardship program, you often have to apply. You may be able to find the creditor’s eligibility guidelines online.
When discussing your options, be sure to specify how much you can afford to pay (if anything) and how long you’ll need assistance. Some credit card issuers have both short- and long-term payment plans — for example, American Express offers 12-month and 48-month payment plans if you qualify for its American Express Financial Relief Program.
File for unemployment or other government assistance
If you were recently laid off or are out of work through no fault of your own, you may qualify for unemployment benefits through your state. The U.S. Department of Labor has an online resource to help you learn how to file for unemployment in your state.
Eligibility requirements vary by state, but you typically need to have worked consistently for the past 12 to 24 months, have earned a certain amount of money during that time, and be actively looking for a new job. It may take a few weeks to actually receive payments. You’ll generally earn a percentage of your lost wages in the form of a weekly benefit.
In addition to unemployment benefits, you may qualify for other programs, such as:
- Food assistance: This can include the Supplemental Nutrition Assistance Program, previously known as food stamps. You may also qualify for the Special Supplemental Nutrition Program for Women, Infants, and Children, school meal programs for children, and other food assistance programs.
- Medicaid or COBRA: Medicaid is a medical insurance benefit for low-income individuals. If you had health insurance through your previous employer, you may also be able to maintain it for a limited period with coverage from the Consolidated Omnibus Budget Reconciliation Act, or COBRA.
- Housing and utilities assistance: You may qualify for emergency housing assistance or government programs to help with utility bills, like your energy bill.
Adjust your budget
When you’re in a tight situation financially due to job loss, you may need to drastically adjust your budget. Start by eliminating expenses that aren’t necessities.
Then, prioritize expenses that you absolutely need to survive, such as housing and food. In addition, aim to make at least the minimum monthly payments on your credit cards if you can. This can help you avoid late fees and a hit to your credit due to missed payments.
As you refocus your budget, consider these budgeting strategies:
- Bare-bones budget: A bare-bones budget is a basic, stripped-down budget that only includes necessities. With this method, you temporarily relieve yourself of other financial burdens that may not be required for you to live comfortably.
- Cash stuffing: Also known as the envelope budgeting system, this method involves labeling physical envelopes with different categories, like groceries and dining out. After you pay for necessities, like rent, you put any leftover cash into the envelopes for specific expenses. You then spend only the cash in each envelope. This can be a great way to visualize your money and avoid overspending.
- Zero-sum budget: Also known as zero-based budgeting, a zero-sum budget assigns a specific purpose to every dollar of your income. The idea is to hit zero each month after spending money on everything in your budget, including savings. This method can help you become more intentional with your spending and avoid impulse purchases.
Consider credit card refinancing
Depending on your situation, you may want to refinance or consolidate your credit card debt. You can refinance credit card debt using a balance transfer credit card — this is a new credit card, often with a low or 0% annual percentage rate (APR) for a promotional period. Transferring your existing credit card balances to a new card with a 0% APR can make it easier to pay off your cards, since you can make payments without paying any interest.
However, after the promotional period ends — which is typically anywhere from six to 18 months — the card returns to its original interest rate, which could be high. You must also pay a balance transfer fee, which is either a percentage of the balance you’re transferring (usually 3%) or a fixed amount.
Try debt consolidation
With debt consolidation, you combine your credit card balances and take out a personal loan (ideally with a lower interest rate) to pay it off. This can make debt management easier, since you have just one payment to keep track of. You’ll have a fixed interest rate, so you’ll know exactly what your monthly payment will be each month. Personal loans generally have much lower interest rates than credit cards, so if you qualify for a debt consolidation loan, you can potentially save a lot of money.
Good to know: In order to qualify for a debt consolidation loan, you may need proof of income. This can be challenging when you’re unemployed, but you can use unemployment benefits, child support, and other sources of income for this purpose.
You can compare rates on debt consolidation loans from various lenders in minutes with Credible.
|Lender||Fixed rates||Loan amounts||Min. credit score||Check rates|
|7.99% - 29.99% APR||$7,500 to $50,000||Does not disclose|
|8.99% - 35.99% APR||$2,000 to $50,000||600|
|7.99% - 24.99% APR||$2,500 to $40,000||660|
|11.52% - 24.81% APR||$5,000 to $40,000||640|
|7.99% - 25.49% APR with autopay||$5,000 to $100,000||700|
|9.99% - 35.99% APR||$3,500 to $40,000||640|
|8.99% - 25.81% APR10||$5,000 to $100,000||Does not disclose|
|8.49% - 35.99% APR||$1,000 to $50,000||600|
|5.2% - 35.99% APR4||$1,000 to $50,0005||620|
Look into credit counseling
Credit counseling is another option if you’re struggling to repay your credit card debt after becoming unemployed. Nonprofit credit counseling agencies are often free to use and can help you come up with a payment plan and explore debt relief solutions.
Credit counselors are experienced and may be aware of negotiation strategies or resources that can help you in your time of need. Visit the National Foundation for Credit Counseling website to find legitimate credit counseling services in your area.
Should I use my credit cards when I’m unemployed?
It’s best to limit the use of your credit cards when you’re unemployed. Using credit cards at this time may provide some instant relief, but you’ll be responsible for paying the bill later. This is challenging to do without an income.
If you miss a credit card payment, you could be subject to a fee and your debt balance will just increase, making it harder to pay down even after you begin working again. Instead, rely on any emergency savings you may have to get by, as well as any community resources or government benefits you qualify for. You may also want to look into a side hustle, like driving for a ride-share company, to earn extra cash in the meantime.
If you’re ready to take out a debt consolidation loan to tackle your credit card debt, use Credible to compare rates from top lenders.