Powell & Mnuchin voice optimism but back more economic support
Programs offer things like deferred payments and lower interest rates Is credit card relief little help? Check out debt management Officials stress that major sectors of economy still suffering
Ascardholders experience financial difficulties due to COVID-19, some credit card issuers are promoting their hardship programs.
Once a well-kept secret, these programs are now more prominently advertised, offering things like deferred payments and lower interest rates. But not all cardholders will qualify or receive favorable terms.
If you’ve been denied COVID-19 relief, if it’s insufficient, or if your relief terms are expiring, consider turning to a nonprofit credit counseling agency. Credit counselors may be able to help you with get-out-of-debt options – among them, possibly, a debt management plan, which rolls several balances into a single payment at a lower interest rate.
“It essentially works as a consolidation loan without creating a new loan,” says Thomas Nitzsche, a spokesperson for Money Management International, a nonprofit credit counseling agency.
Here’s what to know about this kind of assistance.
Credit card hardship programs are ideal for balances that can be paid down over a few months. Terms vary by issuer, and relief is generally granted on a case-by-case basis. To determine your eligibility, you must contact your card issuer.
Debt management plans are better suited for long-term debt that can take up to five years to pay. They consolidate different balances like unsecured loans, certain kinds of medical debt and credit cards into one payment at a fixed rate, according to Nitzsche.
You wouldn’t go through your card issuer directly for such a plan, but a third-party credit counseling agency may suggest it for you, if you qualify, and set it up with the issuer.
Credit history isn’t a factor for eligibility, but you do typically need a regular income to show you can contribute payments that meet the plan’s terms. One missed payment may dissolve a debt management plan.
There are also usually fees involved with a debt management plan, which can vary based on factors like where you live.
But fees may be negotiable, and your savings will typically outweigh the cost.
Unlike a hardship program, a debt management plan may also save you time. For Helen Kerins, a New Jersey-based YouTuber at the channel Krazy Kerins, the best part was letting the credit counseling agency negotiate with issuers. “I don’t have to talk to the creditors anymore,” she says.
Kerins, 42, had already used a debt management plan in her 20s to pay off creditors, but she acknowledges that afterward her habits didn’t fully change. By 2016, though, her priorities were different as a wife and new mom, and she was determined to tackle almost $44,000 in debt.
She contacted a credit counselor and submitted credit card statements, account numbers, contact information and other details. Together they discussed her options over the phone and determined that a debt management plan was fitting. (Credit counselors may offer other options or resources for budgets in the red.)
After the agency reached out to Kerins’ credit card issuers, she got a significant break on interest, and her monthly outlay toward that debt fell sharply, too.
Before, “I was paying close to like $700 or $800 a month in just my credit cards,” Kerins says. The debt management plan got that figure down to about $475 a month total, and that included the $25 monthly service fee charged by the counseling service.
If, say, only some of your creditors are offering you hardship relief directly, you could potentially enroll the other accounts in a debt management plan.
“The (debt management plan) is pretty flexible,” Nitzsche says. “You can add or remove creditors at any time for any reason.”
Relatedly, even if you may have been previously enrolled in, or denied for, a hardship plan, that doesn’t typically deter issuers from offering affordable terms through a debt
management plan. Spokespersons at American Express and Wells Fargo, for instance, confirmed that those issuers are willing to work with such cardholders.
With either kind of plan, you may have to stop using your credit cards. Your issuer may even close them. But even then, you may have other options.
In Kerins’ case, monthly payments were automatically debited from her bank account, and she whittled almost $44,000 in debt down to $10,000. Her husband then used his own good credit to qualify for credit card balance transfer offers, and she moved her balance onto those cards to save more money and accelerate the debt repayment.
She finished paying off that debt entirely in December 2019. (AP)
WASHINGTON, Sept 23, (AP): Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin expressed cautious optimism Tuesday that the U.S. economy is rebounding from the pandemic-induced recession with federal support but that more help from the government is likely needed.
Powell told the House Financial Services Committee that he believed the economy was “healing.” Mnuchin, the chief economic spokesman for the Trump administration, proclaimed that the country was in the “midst of the fastest economic recovery from any crisis in history” after the steepest economic plunge since the Great Depression of the 1930s.
Striking a more cautious note, Powell noted that the job market has regained only about half the 22 million jobs that were lost in March and April when the virus flattened the U.S. economy, triggering a recession. Both officials stressed that major sectors of the economy were still suffering.
Some Republican lawmakers complained that House Democrats were blocking approval of further relief because of their insistence on achieving a larger package than GOP lawmakers are willing to support.
Mnuchin said he was ready to resume negotiations and said the administration would be willing to support stand-alone legislation to boost support through the Paycheck Protection Program, which benefited small businesses.
“We are in a very different situation than we were the last time,” when Congress enacted nearly $3 trillion in emergency financial aid, Mnuchin said. “At that time, the entire economy was shut down.”
Mnuchin said that further federal aid should be focused on the most damaged sectors of the economy, such as restaurants and the travel industry.
“This time,” the Treasury secretary told lawmakers, “it should be much more targeted to industries that are most impacted.”
Tuesday’s testimony from Powell and Mnuchin began three days of oversight hearings on the government programs that were enacted last spring to cushion the impact of a devastating recession in which much of the economy was shut down to try to limit the spread of the coronavirus.
That support totaled a record high of nearly $3 trillion and included such measures as economic impact payments of up to $1,200 per individual, enhanced unemployment benefits of $600 per week and a Paycheck Protection Program to encourage small businesses to keep workers on their payrolls.
The Democratic-led House passed additional support. But Senate Republicans have balked at the size of the measure, and both sides have spent months arguing over possible compromise legislation. After some programs expired this summer, President Donald Trump signed executive orders to keep aid flowing, although that effort has produced limited benefit.
Pressed to say what types of aid the Trump administration would support in a new bill, Mnuchin said the administration would favor sending another round of $1,200 in individual payments.
The loans provided to small businesses through a program run by the Small Business Administration and the Treasury Department and can be forgiven as long as much of the money goes to keeping workers on the payroll or rehiring laid-off workers. Some lawmakers said they were hearing that the forms that are needed to gain forgiveness for the loans were too complicated.
Mnuchin said the Treasury and the SBA had worked to make the forms simpler to fill out. He said the administration would be willing to consider some type of blanket forgiveness that would speed up the process if Congress wanted to pass legislation to that effect.