The Coronavirus Crisis: A Guide to Credit Card Payment Deferrals

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Asking for credit card payment deferrals can be an effective strategy to weather the coronavirus crisis. This article explains all about how to get credit card payment deferrals.

In response to increasingly uncertain economic times thanks to COVID-19, Canadian banks have begun to offer credit card payment deferrals to help Canadians who are struggling. Since the offers started being made on March 17, the Canadian Banking Association reports there have been over 100,000 requests for credit card payment deferrals. The offers differ, but they all have one thing in common: you have to ask for them.

In This Article:

How to Get a Credit Card Payment Deferral?

A credit card payment deferral allows you to skip monthly minimum payments without penalty for a certain period of time (e.g. 3 months, 6 months, etc.). At the end of the deferral period, you do not need to make up your payments all at once: the minimum payments will resume as per your cardholder agreement. One thing to note: interest will still accumulate during the deferral period, so only do if absolutely necessary.

To get a credit card payment deferral, contact your bank or credit card issuer by phone or online. There will likely be a recording with the basic information, and a long wait time to speak to someone, but hang in there. At most banks, any customer service representative can make you an offer, usually right there on the phone. Ask for an email confirmation once you’ve made the deferral, but don’t be surprised if they’re not able to provide one.

Because of the coronavirus crisis, some banks or credit card issuers are also offering reduced interest rates for a limited time. For instance, rather than pay the average 19% interest, you may see your annual interest rate slashed to as little as 10.99% for a few months, allowing you some breathing room to pay down your balance. Again, ask your credit card issuer if this is an option.

How Are Credit Card Companies Responding to COVID-19?

With the coronavirus crisis, things are changing by the hour. But here’s what we know so far:

? ? Tangerine

Effective April 1, Tangerine Bank will temporarily reduce credit card interest rates to 10.99% for those who receive a credit card minimum payment deferral. Also starting April 10, Tangerine clients can request credit card minimum payment deferrals online, eliminating the need to call in and wait for ages to talk to a human. The interest rate reduction will be applied as an interest credit each month during the deferral period.

? ? BMO

The bank is warning about long wait times by phone and suggests you use their “online support tool” at BMO.com. Unfortunately, they have not set it up with any COVID-related information, so you will need to phone. However, in a press release from April 4, in addition to the payment deferrals, BMO is offering an interest rate reduction to 10.99% for the outstanding balance. For those who already applied, BMO says this will be retroactively implemented.

? ? Scotiabank

As outlined on their website, Scotiabank is offering up to 3 months deferral of payments, and the same 10.99% interest rate on the balance. If you have creditor insurance, those premiums will remain in place. As of April 7, they are accepting online requests for COVID-19 relief.

? ? RBC

As detailed in a recent press release, those who apply for a credit card payment deferral for their RBC cards will receive a 50% reduction in their interest charges, and that the difference in interest will be credited to the account.

? ? TD

According to its website, TD Canada Trust is offering a 3-month deferral for those who apply but is not offering any savings on interest. For those outside Quebec, the interest accruing on the deferred payments will be added to the initial minimum payment. For Quebec residents, it will be added to your outstanding balance.

? ? CIBC

CIBC has an online form to make your credit card payment deferral request. According to its website, the bank is not offering any interest reduction and will add accumulated interest from the deferred minimum payments to your outstanding balance at the end of the deferral period, which is 3 months.

Alternatives to a Credit Card Payment Deferral

If you are carrying a large balance, a credit card payment deferral may not be the way to go, since the interest that will continue to accrue may exceed any short-term savings. But there are other options.

Transfer Your Credit Card Balance

If you’re carrying a balance, buy some extra time by doing a credit card balance transfer. This involves moving high-interest debt on one credit card to a new credit card with a much lower interest rate. With a balance transfer credit card, you’ll get a limited period of time with a low (or no!) interest charged on that balance – giving you extra time to pay down your debt a heck of a lot faster and save a bundle on interest over the long run.

If your financial situation is precarious right now, look for a balance transfer credit card with a 0% introductory interest rate and a long promotional period (9-12 months is ideal). For an in-depth comparison of the best options, read our article on The Best Balance Transfer Credit Cards in Canada for 2020.

Get a Personal Loan

Getting a personal loan can help tide you over, as well as save you money on interest charges in the long-run. For instance, Loans Canada offers loans up to $50,000 and interest rates start as low as 5.15%. It’s the largest lender network in Canada, and while Loans Canada doesn’t lend money itself, it works like a search engine to find the best personal loan to suits your financial circustances. If you have bad credit, there are loan options available that could relieve some of your financial stress in the short term.

If you can get a personal loan with favourable terms and a lower interest rate, you may want to take advantage of the more flexible credit environment to consolidate your credit card debt. After all, why pay 19% interest on a credit card balance when you can pay as little as 5.0% in interest? Read more about The Best Personal Loans in Canada.

Learn more about Loans Canada

Increase Your Credit Limit

Because banks are softening their usual credit restrictions, this could also be a good time to increase your credit card limit. There are obvious drawbacks to this, since they are still charging interest. If you go this route, be realistic about what you can really afford to take on in terms of debt. Don’t ask for any increase that you can’t manage once your payments are reinstated (probably in 3 months’ time).

Get a Line of Credit

Some banks are also offering to increase your personal lines of credit. But if you don’t have one, this may be the time to apply. A line of credit (LOC) is an open-ended loan that lets you borrow money at any time, up to a set limit. As these usually come with relatively low-interest rates, this could be a good option, either for access to credit at better rates. You might even get a rock bottom interest rate if you take out a secured or home equity LOC.

FAQs – COVID-19 and Credit Card Payment Deferrals

? ? Will Credit Card Payment Deferrals Affect My Credit Rating?

Probably not. Most Canadian banks claim that they will not report the deferred payments to the credit bureaus as missed payments. While there are no guarantees that other financial factors brought on by the COVID crisis won’t affect your credit score, it seems that credit card payment deferrals are safe. If you are still concerned, you may add a consumer statement to your credit report explaining any extenuating circumstances (such as COVID-19) you would like them to take into account. Here is how you can do it with Equifax.

? ? Does Everyone Qualify For Credit Card Payment Deferrals?

No. It’s on a case-by-case basis. If you make a request, your bank will look into its picture of your financial situation. If it decides you don’t qualify either because you don’t really need it, or because you’re too great a financial risk, they may deny your request. If you have any special circumstances that would not show up in your customer profile or credit report, let them know as part of your request. But remember, even if you are denied, there are many ways to eliminate credit card debt.

? ? Will Credit Card Payment Deferrals Stop My Pre-Authorized Credit Card Payments?

No. If you have set up automatic payments, you will need to go in and remove these manually.

Last Word

These are tough times, and there’s no single strategy for working through it. Everyone has a different struggle and depending on your financial circumstances, your plan of attack may look different. Aside from what we’ve laid out above, you can relieve the strain by doing a few things like cutting expenses, applying for a mortgage payment deferral, or even cutting a deal with your landlord for rent reductions. Above all, don’t forget to apply for the COVID-19 government financial aid! But if your credit card balance causing your anxiety, a credit card payment deferral could be a useful tool in helping you get through this with your finances intact.