How to Handle Credit Card Debt When You're Unemployed

By Ashley Eneriz on 3 April 2017 0 comments

As if unemployment isn't a big enough blow on its own, dealing with debt while out of work can make things even worse. You might be able to catch a break from federal student loans and even some private loans through temporary deferment and forbearance — but what about credit card debt?

See also: How to Manage Debt While Unemployed

Call your creditors

While your unemployment status might want to make you hide from the world, it is best to deal with the situation head on and right away. Call your creditors first thing and explain the situation. See what they can offer in terms of assistance. Even if they can allow you to skip a month of payments without penalty, it will help.

See if you qualify for a 0 percent balance transfer card

If your credit score is strong, you could qualify for a credit card with a promotional 0 percent balance transfer offer. Transferring your credit card debt can help you save money on your monthly credit card payments by avoiding interest charges. Just know that there are a couple of catches. First, you will usually have to pay a balance transfer fee (3 percent is typical). Secondly, if you do not pay off the transferred balance during the promotional period, you'll be subject to an interest rate that's usually higher than average on the remaining balance. (See also: When to Pay Off Credit Card Debt With a Balance Transfer)

Put your budget in emergency mode

Even if you don't plan on being unemployed for long, it is still a good idea to put your budget in emergency mode until you have secured another position. Cut everything but the basic necessities. This includes all of your cable or TV streaming options, fast food and dining out, and any unnecessary shopping. Live as if you only have enough money for basic groceries and utilities.

Don't fall for quick fixes

When money is tight, people get desperate. Don't fall for quick money fixes that will only mess up your finances further. Payday loans and cash advances might seem like promising solutions, but they come at a grave price. You don't want to waste money or ruin your credit during this time. (See also: How to Protect Yourself From Predatory Lending)

Also avoid racking up more credit card debt to cover your living expenses. While a new credit card might make one month of living easier, it will certainly make balancing your finances harder in the future.

Get creative about cash flow

While your paycheck might be cut off, you can still bring in a few hundred dollars through creative means. What side jobs can you do while you are looking for new work? Can you take on a few hours of lawn work or babysitting each week? (See also: How to Come Up With $1,000 in the Next 30 Days)

Also, don't underestimate the value of the clutter lying around your home. Deep clean your house and find all of the stuff you no longer use or like. Sort into three piles: an eBay pile, a Craigslist pile, and a garage sale pile. Everything small and with a resale value of more than $5–$10 can be listed on eBay (think designer clothing, tech gadgets, and profitable character items or collectibles). Anything large with a decent resale value can be listed on Craigslist (think furniture). And finally, everything else can be sold at a garage sale. (See also: Make Money and Declutter by Selling These 5 Unlikely Treasures)

The process can bring in about $500–$1,000 extra cash, depending on what you have to sell. You will be surprised by what types of things sell on eBay, so be sure to look items up before deeming them unsellable.

Save drastic measures for last

Hopefully your unemployment will be short-term, but in case it isn't, have a backup plan. Here are a few things to discuss with your family and to consider further. They might not be desirable, but they can keep you financially stable in the face of your debt burden:

  • Expanding your job search geographically
  • Moving in with relatives for a short duration
  • Renting out a room in your home or renting out your whole house
  • Selling a vehicle
  • Downsizing your home and moving to a more affordable area

Dealing with credit card debt on top of unemployment is hard, but you have options. Don't take your situation lying down and don't be ashamed to tell people, especially your creditors who may be able to offer temporary relief.

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