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How do credit card payment deferrals work during COVID-19?

April 17, 2020 Renee Sylvestre-Williams
How do credit card payment deferrals work during COVID-19?

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If you’re dreading your credit card bill, you’re not alone. According to the Bank of Canada, 30% of us carry a balance from month to month, accruing interest, on average, at an eye-watering 19.99%. Simply put, we’re in the red, with an average of $23,800 per Canadian owing on credit cards, lines of credit, loans and other non-mortgage debt, according to Equifax Canada.

Those stats are from the end of 2019. Since the COVID-19 pandemic took effect, Statistics Canada reports that more than one million Canadians lost their job in March, taking the unemployment rate from historic lows to 7.8%. The job loss is a decline not seen since the 1980s. 

What does that mean to our day-to-day financial lives? One in three (34%) Canadians are worried that they may miss rent or a mortgage payment or have to borrow money, according to an Angus Reid survey, released March 25. In addition, the survey found that 37% of households who have experienced job loss say that they aren’t equipped to handle an extra $100 expense in the next 30 days. 

With all this in mind and no set date for the country to reopen, we’re all looking to pare our expenses down. That means cutting back on unnecessary expenses, as well as reducing food waste by cooking everything in the pantry. If, after doing that, you’re still short on cash to cover necessities, you might want to consider deferring payments where you can, including on credit cards. 

What does credit card deferral mean?

Before you make that decision, it’s important to understand what deferring payment means. It’s not a wiping out of debt, as when Chase Canada exited the market and forgave all credit card debt for its customers. While you won’t have to make any payments now, you will have to pay your balance eventually. Plus, while you’re deferring payments, interest is still accruing on your balances. 

Canada’s Big Five banks, and other financial institutions, are offering credit card payment deferral upon approval. That means even if you think you need the financial breathing room that temporarily not having to pay your credit card bill would provide, your credit card issuer may not agree. The amount of time you can defer payment varies from issuer to issuer, generally one to six months.

Will deferring payments affect my credit score?

Once you officially contact your financial institution and get approved for deferral, a skipped payment will not affect your credit score. 

What deferral options are available from major credit card issuers?

Let’s look at the deferral options some of the major credit card issuers are offering for personal credit cards, and what that means for you if you are approved.  

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