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Credit Cards

How Credit Card Issuers And Cardholders Are Being Affected By The Corona Virus


By Choncé Maddox

Expert contributor for Credit Knocks


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If you’ve logged into your credit card account lately or used the mobile app, you’re likely seen a special message or alert regarding how they’d be handling issues brought on by Covid-19.

Credit cards are often a huge part of financing American households.

According to the U.S. Federal Reserve, the average family was carrying $5,700 of credit card debt before the pandemic.

covid-19 credit cards

With money unemployment at peak numbers and many businesses trying to get back on their feet, these issues trickle down to affect many credit cardholders.

Luckily, most credit card issuers are trying to offer different types of assistance and even change credit card perks.

Types of Covid-19 Credit Card Relief Options

At first, card issuers were offering more general advice and guidance during the initial Covid-19 outbreak. It wasn’t uncommon for most consumers to get bombarded with tons of emails stating ‘We’re all in this together”.

While this may sound reassuring, sometimes the message failed to solidify any solid solution. Like most of us, card issuers likely had to take a moment to process what was going on and how current events could change the credit card industry.

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It makes sense that people might struggle to pay their credit card bills during a pandemic or begin to use their cards differently.

By now, each card issuers has laid out their own specific plan regarding any changes or assistance offered so you’ll want to confirm what your options are.

Below are some important things you can expect in general from your credit card companies during this time.

Hardship Program

Most credit card issuers are presenting a hardship program that cardholders can apply for if they need assistance.

In order to qualify, you must have been affected financially by Covid-19 in some way, whether you got laid off or had to quarantine for multiple weeks and couldn’t work.

Try calling the number on the back of your credit card to see if there is a hardship program and what it entails.

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Late Fees Waived

The average credit card late fee is around $36 but you may be able to get this fee waived if you can’t pay your credit card bill on-time right now.

Unfortunately, according to Experian, card issuers can and likely will still report to the major credit bureaus that you missed a payment, this could negatively affect your score.

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Depending on your balance, your minimum payment may be anywhere from $25 to $80 on average.

If you can afford it, paying the absolute minimum right could help spare your credit score.

Payment Deferrals

If you can’t afford your credit card bills at all right now, applying for a payment deferral is the best option right now if offered.

Card issuers like HSBC, Bank of America, Wells Fargo, Citi, and Discover are all offering these options in some capacity.

It’s important to talk to your credit card company and make a payment arrangement instead of just not paying the bill.

With a payment deferral, you can typically skip a monthly payment or temporarily put payments on hold.

You will still be expected to catch up after the deferral period, but so long as you adhere to the terms of the agreement, your card issuer won’t report your account as delinquent.

Annual Fee Waivers

Your annual fee could pop up at a bad time if you’re tightening your budget or suffering from an income loss right now.

Some banks like Wells Fargo are waiving the annual fee for some of their credit cards.

If the annual fee is coming up, call your card issuer to see if they’d be able to waive the fee. It’s always worth a try.

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Extended Sign-on Bonus Period

If you have excellent credit, you can definitely take advantage of sign-on bonuses to earn points or cash back with rewards cards.

Generally, most sign-on bonus periods allow you 1 to 3 months to meet the minimum requirements but card issuers like American Express have extended their welcome bonus and are offering other rewards incentives as well. 

Should You Still Use A Credit Card?

Actually, more people seem to be using credit cards now. Research shows that credit cards now make up 82.1% of all retail (in-store) transactions in the U.S. during the pandemic.

Some shoppers who’ve used cash in the past are also opting to use credit cards. If you’re wondering why this is the case, a few key factors come into play.

To start, a national coin shortage is underway and many retailers are recommending customers use a credit or debit card to pay for purchases if possible. Also, shopping online is even more popular and convenient now with more people opting to stay home and social distance.

Card issuers are also offering more generous rewards. For example, Chase announced that some of their cards will offer more rewards on groceries, gas, and delivery services. Travel rewards cards are also making similar offers to adjust to the changing times. 

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Determining whether to use a credit card should ultimately come down to whether you believe you can pay the bill on-time. Late payments and credit card debt can damage your credit score as well as your overall financial situation.

It’s still important to keep your credit card utilization on the lower end and budget for timely payments.

covid-19 affects credit cards

How To Obtain Better Credit Card Options

Using a credit card is one of the absolute best ways to build and maintain your credit score. You can build positive credit history with each on-time payment, and keep your credit utilization low to keep your score high.

Having a great credit score can also save you thousands of dollars whether you’re looking to get a car loan, personal loan, or a mortgage in the future.

If you have bad credit, you may not qualify for some of the best rewards credit cards mentioned above, but you can always start with a secured credit card.

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Summary

Using credit cards wisely can come with many perks and even help build your credit score.

While card issuers try to adapt to the economic changes brought on by Covid-19, it’s important to make sure you’re taking advantage of relevant relief options and also working on improving your credit long-term.

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