What to know before accepting COVID-related credit card relief

As the economic impact from the COVID-19 pandemic continues to grow, many credit card issuers are offering temporary relief – including waived late fees and minimum payment requirements – for a couple of months.

If you’re looking for relief from your credit card payments, know that accepting assistance from credit issuers comes with some caveats. Here’s what you need to know if you take your credit card company up on a relief offer.

Relief isn’t automatic or instant. While some COVID-related hardship is automatic, credit card relief typically is not. To get assistance, you will need to contact your credit card company. Some issuers now allow you to apply for relief online. But whether you apply online or over the phone, you may need to wait for a response.
Relief is short-term. So don’t expect issuers to permanently lower your interest rates, payments or debts. If you are facing more serious financial hardship and need longer-term assistance managing your debt, consider reaching out for credit counseling.
Know that interest may still accrue. While some credit card issuers may offer a break on interest, many are not. Note that even if an issuer allows you to skip minimum payments for a time, interest will generally continue to accrue at the usual rate. So while you may not be making purchases on that card, your overall balance will still increase and your future payments could be more. If you’re struggling, accepting a short-term forbearance can make sense. If you can afford to make at least the minimum payments while meeting all of your other financial obligations, it’s generally better to do that and save on interest.
Issuers may lower your limit or close your account. In some cases, credit card companies may offer relief on the condition that they freeze your card, lower your limit or close your account. This could hamper your purchasing power when you need it the most. If you’re unsure about what you are agreeing to and the terms are unclear, ask questions.
Autopay needs to be updated manually. If you are approved for COVID-19 credit card relief, that doesn’t mean your issuers will change your autopay settings. Generally, if you have autopay set up, you’ll have to go in and update the preferences yourself.
Credit protection for COVID-19 is limited. When accepting COVID-19 credit card relief, you’ll only get limited credit protection. If you fulfil your end of the agreement, the issuer is required to report your account as current, unless it was delinquent previously. If you’re not paying the minimums on your card and you’re still spending, your credit utilizations ratio - the percentage of available credit you’re using – will still increase. This can also lower your credit scores.
If you get relief now, you may not be eligible later. While credit card issuers are generally willing to work with individuals experiencing financial hardship, there’s generally a limit to how much help they’re willing to give. If you claim COVID-19 credit card relief now, you might not be able to claim it a second time. If you’re struggling financially and don’t think you’ll be able to make your minimum payment, taking the relief now makes sense. But if you’re financially stable, consider holding off in case you need help later on.