Jean Chatzky
Do One Thing: If you can’t make a payment, don’t fall deeper in debt by spending more on your credit cards. Put the plastic in a drawer for safekeeping, or shred it (!) and request a new card when things settle down.
Hardships Happen
Successfully managing money doesn’t always come easy right out of the gate. For those who may not have had classes on personal finance during high school, navigating the ins-and-outs of credit and debt can sometimes feel overwhelming. Throw in a hardship or emergency, such as a job loss, debilitating illness, or accident, and your ability to stay on a firm financial footing could take a hit.
If you find yourself in a situation where you think you may miss a payment, it’s important to take action. Ignoring the situation won’t make it go away, and could make things worse.
What Qualifies as a Missed Payment?
Being a few days late with a payment usually isn’t a big deal – unless it’s your tax bill. Aside from that, many lenders don’t consider a missed payment to be an unpaid bill until it’s at least 30 days past due. While that scenario isn’t ideal, it happens to more people than you might think. An estimated 18 to 22 million Americans miss at least one payment a year.
In its Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York found:
- Up to 10% of active credit card accounts became 30-plus days delinquent at least once per year in 2024.
- Younger borrowers (between the ages of 18 and 29) had the highest delinquency rates, between 9 and 12% per quarter.
And a credit industry report from TransUnion showed:
- As many as 3.5% of U.S. adults with credit cards are 90-plus days delinquent at any given time.
- During 12 months, TransUnion estimates that up to 12% of U.S. cardholders miss at least one payment.
Creating an Action Plan
Now that you understand what qualifies as a late payment, let’s talk about the best ways to handle the situation. Shar-Né Warren, CFP, CRPC, founder and financial planner with Financial Excavation, understands that facing job loss or other financial difficulties can be stressful. She believes that having a firm grasp on potential solutions can be both reassuring and help with developing a proper action plan.
What to Do If You Are Going to Miss a Payment
“If a client anticipates missing a payment, I highly recommend contacting creditors in advance to inform them and explore available options, grace periods, and timelines. They may be eligible for certain programs or payment deferral options.” Here are the steps to take:
1. Call your credit card company immediately
While this might be a hard pill to swallow, it’s important to be up front with credit card issuers and other lenders that you owe. Tossing unopened bills in a drawer (or worse, the trash) won’t make the money problem go away. As noted by Warren, many credit card companies offer hardship plans or temporary relief, which could include lowering monthly payments, deferred payments, or waived fees.
2. Review your income and spending right away
If money is tight, your next step is to look closely at your budget so you can get a better understanding of what you can realistically pay a creditor each month. To do this:
- Take stock of all of the money coming into your household each month.
- Gather monthly financial statements and go line-by-line through your expenses, making sure to account for payments made via apps and with cash.
- Cut out non-essential spending on memberships, streaming services, and restaurant meals.
- Redirect those savings to pay critical bills that will keep the lights on, etc.
3. Prioritize essential bills first
Some bills matter more than others when your paycheck isn’t stretching to the end of the month. Until you can get your finances back on track, you’ll need to prioritize:
- Housing, including mortgage or rent, property taxes, and insurance
- Utilities, including electricity, water, gas, heat, and internet
- Transportation to get you to and from work and school, including your car loan, gas, and vehicle insurance
- Healthcare to preserve your ability to go to the doctor
- Childcare to preserve your ability to go to work
4. Consider nonprofit credit counseling
If your debt issues have been ongoing and are beginning to impact your quality of life, it’s time to seek help from a nonprofit credit counselor. They can often help you honestly evaluate your finances, create a debt management plan, and even negotiate lower interest rates with creditors.
The National Foundation for Credit Counseling (www.nfcc.org) can offer a listing of counselors in your area. Your credit union or bank may also be able to suggest other credit counseling options.
5. Resources for help with other expenses
The United Way can be a trusted resource for those who may need extra help during times of crisis. They partner with dozens of other agencies and businesses to help individuals cover everything from medical expenses to utilities and food. In the U.S., contact your local United Way to see what help may be available. In many areas, you can call 211 or visit 211.org for assistance.
With reporting by Casandra Andrews
