Welcome to Money Matters, featuring WSECU's Briana Mickelson, VP, Member Experience. In this ongoing radio segment and blog series, you'll find personal finance advice, spending and saving tips, and information about current financial trends. Gain practical knowledge you can use every day to help you make the most of your money. Explore the latest episode topics each week.
Credit card hardship programs
It's easy to get into a hole with credit card debt, especially during the COVID-19 pandemic. Credit card debt puts a strain on your entire financial health as well. So how do you get relief?
You could explore a short-term solution with your credit card issuer. You may be able to skip a few payments or get your payments reduced. If you've exhausted all your short-term options for meeting your minimum payments, you may need to look into a debt relief or credit card hardship program. This program is a payment plan that you can negotiate with your credit card issuer, and it can lead to waived fees, lower interest rates or reduced payments over a designated time frame.
Keep in mind that these programs aren't for everyone. Enrolling in one doesn't mean your troubles are over.
Here are the pros of a credit card hardship program:
- You may get a reduced interest rate. This can save you hundreds over the period you have to pay down the debt.
- You may get your minimum monthly payments reduced. This can also save you significantly over the term of the hardship agreement.
- You may get relief on a portion of the overall debt. For example, on a $10,000 debt, your card issuer may eliminate as much as $5,000.
- You may be able to avoid taking a hit on your credit score. A slew of late payments or bankruptcy will hammer your score. You can potentially avoid these with a credit card hardship program.
Here are the cons of a credit card hardship program:
- You will have to call your credit card issuer to explain your situation. These programs are designed for cardholders who are seriously in need.
- You may have to negotiate the terms directly with your card issuer. For many, this is outside of their comfort zone.
- Even though the program could help you avoid serious dings on your credit score, the act of enrolling could affect your score. Every program is different, so pay attention to the terms of your agreement.
- Enrollment might also result in a credit limit reduction, a frozen or closed account, a financial review of your account, and continued interest accrual.
If you decide to enroll in a credit card hardship program, stick to the agreement's terms. That will require you to get used to your new monthly budget as soon as possible. Obviously, this will reduce your debt and ease the burden on your finances. However, if you don't stick to the terms, your agreement could be canceled, putting you back into financial crisis.
With COVID-19 credit card relief, there is limited credit protection. As long as you live up to your end of the bargain, your credit card issuer is required to report your account as current unless it was delinquent when you entered the agreement. In that case, it will continue to be reported as delinquent until you bring it current.
Remember that a credit card hardship program is meant for short-term relief. You should still develop a long-term plan to continue that relief, including creating an emergency savings account (enough to cover at least three months of bills) and reducing any remaining high-interest debt while still adding to your savings.
There's nothing easy about a credit card hardship program, but if you can successfully navigate it, the hard work will be worth it.
Supporting your local community in tough times
There's no doubt that many of the businesses and restaurants you love are struggling to stay afloat amid the stress of COVID-19. There are a number of ways you can support your community as the businesses within it attempt to overcome these unexpected challenges.
Making small changes to your everyday buying habits is a great place to start. You can really make a difference by using your buying power to support the small businesses in your community. While it's true that many people aren't going out as often as usual, you still have to buy groceries and other necessities. As you make those purchases, consider shopping at local grocers, farm stands, bakeries or other businesses that stock local products.
If you're ordering take-out, choose a local restaurant instead of a big chain, or choose restaurants that specialize in using local ingredients. If you don't need to purchase anything right now, consider buying a gift card for yourself or someone who might need it. It's the equivalent of giving a favorite business an interest-free loan.
Another great way to put dollars back into the community is through donations. If you're in a position to offer a charitable contribution, look for nonprofits doing work within the community instead of giving to a large national organization. From health, housing, and youth organizations to environmental and arts groups, these nonprofits are especially susceptible to the pandemic's economic toll and are often overlooked.
If you're unable to make a financial contribution right now, there are other ways to help. Depending on the organization, you may be able to volunteer your time and talents, which can still impact business staffing and the community as a whole.
On an even more local level, if you have a neighbor who's elderly or lives alone, don't be afraid to call them to see how they're doing. The best way to support your community is to support each other!
Good Neighbor Next Door: How it works
The dream of homeownership may seem out of reach for some, but home-buying options like the Good Neighbor Next Door program are designed to help teachers, firefighters, law enforcement officers, and emergency medical technicians (EMTs) realize that dream. The program allows workers in these professions to buy homes at 50% below the list price with down payments as low as $100.
While the program has garnered a lot of interest, eligible participants often aren't aware of the program's requirements or limitations. The program requires that participants:
- Work full-time in a qualifying job and stay there for at least a year after buying their home.
- Buy a home located in the same area as where they work.
- Bid on qualifying homes within seven days of seeing them on the HUD Homes website.
- Live in the home for at least three years as their only residence.
- Take out a second home loan to cover the discount if they sell the home within three years.
The program's main drawback is its small inventory. Participants can only buy homes that were foreclosed properties financed by the Federal Housing Administration. Because of this, there may be very few, or zero, options when or where someone wants to buy. Because homes are sold "as-is," they may need repair, and the choice of neighborhoods is limited to those designated as revitalization areas.
If the Good Neighbor Next Door program's limitations hold you back, check with your union for resources and consider other programs:
Homes for Heroes: Each "hero" is matched with a real estate professional who offers discounts on title fees, home inspections, real estate commissions, and other costs. The program has helped more than 37,000 participants save money on buying, selling or refinancing a home.
Next Door Programs: These programs, which include Teacher Next Door, Nurse Next Door, Firefighter Next Door, Officer Next Door, Public Servant Next Door and Soldier Next Door, provide grants and assistance with down payments.
Find the right program and your dream of homeownership could become an exciting reality.
Charitable giving during the pandemic
COVID-19 continues to take a significant economic toll that will be felt by individuals and organizations into the foreseeable future. For those eager to help, charitable contributions are ideal for making a difference and supporting the greater community. But where should you start?
You'll first want to look carefully at your budget. Consider your monthly expenses and emergency savings to determine how much you can donate. Choose a set amount and make that a line item in your budget. It's okay if the amount varies monthly, as long as your baseline is realistic.
The next step is selecting a recipient. With so many worthy causes to choose from, the choices can be overwhelming. A little research goes a long way. Use tools like Charity Navigator, GiveWell, and GuideStar to check the credibility of organizations you'd like to help or who may already be reaching out to you. United Way and the Combined Fund Drive are trusted and simple ways to reach a broad spectrum of organizations.
The trick is to find a cause that's meaningful to you personally. Search for organizations doing work in your local community that are in line with your passions and ideals. You can also take a more direct route and fund low-income families or laid-off workers via smaller nonprofit groups like Modest Needs, the 1K Project and GiveDirectly.
Make each donation as impactful as possible by giving larger amounts to one or two organizations instead of making smaller donations to multiple groups. Administrative costs take a proportional slice of the pie, especially at larger organizations. Probably the most effective use of your money — and a real sign of ongoing commitment — is a recurring donation.
Being charitable isn't always about money, though. If money is tight, consider donating your time and talents. Every contribution helps. Whatever you give will be appreciated by those in need, and you can feel good knowing you're supporting others.
As you deal with your financial challenges, remember that you're not alone. WSECU is the credit union for Washington. If you need help with personal banking, loans, or business finances, you can contact WSECU here.
Tune in to STAR 101.5 weekday afternoons at 5:50 p.m. or visit star1015.com/podcasts to hear money tips and ideas to make your dollars go further, featuring WSECU's Briana Mickelson.
You can visit the Money Matters page on star1015.com/sponsored/money-matters to read more money management advice from WSECU.
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