Credit card debt can become difficult to manage long before you actually fall behind or miss a payment. All it takes is a higher grocery bill, an unexpected car repair or another jump in a recurring expense to leave less room in your budget, and if you’re carrying a balance from one month to the next, it can make the problem exponentially worse. And, that’s especially true right now, with the average credit card rate sitting at 22.15%, according to Federal Reserve data.
If your budget is getting tighter, though, falling behind on payments isn’t necessarily the only option. Many credit card issuers offer hardship programs designed for cardholders who are struggling to keep up due to a job loss, income reduction or another type of financial hardship. Depending on the card issuer and your circumstances, these programs may temporarily reduce your interest rate, lower your monthly payment, waive certain fees or otherwise modify the repayment terms.
Those types of concessions can provide valuable breathing room, but accepting them may also change how you can use your card. So, before enrolling, it helps to understand what could happen to the account itself — and whether the short-term relief is worth any restrictions that come with it.
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Will a credit card company close your account if you enter a hardship program?
A credit card company has the option to close your account when you enter a hardship program, but account closure isn’t automatic in every case. The outcome generally depends on the card issuer’s policies, the specific hardship option you’re offered and the severity of your financial situation.
For example, some credit card hardship plans allow the account to remain open but suspend your ability to make new purchases while you’re participating in the program, and your credit line may also be reduced. In other cases, the card issuer may close the account altogether and place you on a modified repayment plan for the remaining balance.
That makes sense from the card issuer’s perspective. If you’re asking for a lower interest rate or monthly payment because you can no longer comfortably afford the existing terms, allowing you to continue adding to the balance could ultimately make repayment more difficult. Restricting or closing the card account lets the issuer provide relief without allowing the debt to keep growing.
A closed credit card account doesn’t make the balance disappear, however. You’ll still owe what you’ve borrowed, but you’ll generally repay the debt according to the terms of the hardship arrangement. That could mean making lower monthly payments, paying a reduced interest rate for a set period or receiving another type of temporary accommodation.
Account closure could also affect your credit. Closing a credit card can reduce your total available revolving credit, which may increase your credit utilization ratio if you carry balances on other cards. And if you’ve already missed payments before entering the hardship program, those delinquencies may remain on your credit reports.
In turn, it’s worth asking detailed questions before agreeing to a hardship plan. Find out whether your credit account will be closed, frozen or left open; whether your credit limit will change; how long the program lasts; what your new payment and interest rate will be; and what happens once the hardship period ends. Knowing those details can make it easier to compare the benefits of the program against its potential drawbacks.
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What if a credit card hardship program doesn’t provide enough relief?
A hardship program can be useful when your financial problem is temporary and the modified payments fit comfortably within your budget. But it may not solve the underlying issue if you have substantial credit card debt across multiple accounts or can’t afford even the reduced payments. In that situation, it may make sense to explore other forms of debt relief before your accounts fall further behind.
A debt management plan, for example, may help you repay your balances through a structured monthly payment plan while securing reduced rates or fees from participating creditors. A debt consolidation loan could also roll several high-rate balances into one loan and monthly payment, generally with a lower overall rate.
Debt settlement, often called debt forgiveness, takes a different approach. Rather than repaying everything you owe under modified terms, the goal is to negotiate with creditors to agree on a settlement that’s less than the full balance. This option typically reduces debt by 30% to 50%, but it’s generally geared toward borrowers experiencing more serious financial hardship, and it carries significant risks, so it’s important to weigh both the pros and cons of this route.
Ultimately, the right option depends on how far your finances have deteriorated. If a temporary reduction in your credit card payment would be enough to get you back on track, working directly with your issuer may be the simplest place to start. If the numbers still don’t work after those concessions, however, broader debt relief options may be worth comparing.
The bottom line
Entering a credit card hardship program doesn’t necessarily mean your issuer will close your account, but it’s a possibility you should prepare for. Your card could instead be frozen or restricted while you repay the balance, and the exact terms can vary significantly by issuer and program. Before enrolling, ask specifically what will happen to your account and credit line, how long the modified terms last and what you’ll owe each month. And if the hardship plan doesn’t reduce your payments enough to make your debt manageable, consider whether another debt relief strategy offers a more sustainable path forward.
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