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Credit card debt can pile up quickly for people who can’t make their credit card payments. If you find yourself in that situation, you may wonder if it’s possible to delay credit card payments.

The good news is, depending on your financial situation, you may have options.

Credit Card Relief Options

Some credit card companies may still provide financial relief programs to their customers in response to financial hardships related to the pandemic. The cardholder can get information about these programs by asking the credit card company about their offerings or visit their website for details on each program.

Although programs may vary by company, here are some of the relief programs that credit card companies may offer.

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Decreasing or Deferring Payments

Many credit card companies allow cardholders to reduce or delay credit card payments for a specific amount of time by offering emergency forbearance. Once the forbearance period ends, cardholders will need to make up any skipped or postponed payments.

While the credit card company may not require cardholders to make up payments right away, they will need to begin to make at least the minimum monthly payment. Depending on the new credit card balance, the minimum payment required may have changed.

Refunding or Waiving Late Payment Fees

Usually, when a cardholder misses a credit card payment, they are charged a late fee. Due to the pandemic, card companies may refund or waive late fees if the customer requests so due to financial hardship.

Lowering the Interest Rate

Some credit card companies may reduce the credit card interest rate on an account during the pandemic. However, this rate may increase after the specified term ends.

Establishing Payment Plans

Some credit card companies help cardholders repay their credit card balance by offering payment plan options. Cardholders may be able to secure a better repayment plan that works for their current financial situation.

Keep in mind that all of these options may vary by creditor.

Consequences of Missing a Credit Card Payment

Increase to the Credit Card Balance

Making a late payment may increase a credit card holder’s balance in several ways. First, credit card companies can charge a late fee of up to $30, even for the first occurrence. If a cardholder misses a payment after that, the late fee could increase to $41. It’s important to note that this fee may not exceed the minimum balance due.

Another way the credit card company may increase the balance is to increase the account’s interest rate. For example, if the cardholder hasn’t made a payment for 60 days, the credit card company may increase the APR to a penalty APR.

Increasing the interest rate can also increase the revolving balance on the credit card. However, not all creditors may charge penalty interest.

Credit Scores May Be Impacted

Since payment history and account standing are some of the factors used to determine a cardholder’s credit score, making late payments may negatively impact it. But the amount of time a cardholder’s credit is affected can vary depending on the situation.

In general, creditors send the payment information to credit bureaus. They use codes to identify the standing of the accounts. But since there is no code for a payment that is 29 days late, they may use a credit code to show the card is current. After the payment passes the 30-day threshold, however, the creditor may use the late code instead.

Using the late code is considered a delinquent payment to the credit bureaus.

It’s important to note that different creditors may use different codes at different times. So it’s hard to determine when a credit score may be affected by a late payment.

While missing a payment may not impact a score initially, it may appear on a cardholder’s score and stay there for several years if it happens regularly. Of course, this depends on the situation and the other factors credit bureaus use to figure the credit score.

The Balanced Could Be Charged Off

Another consequence of making a late payment is that the creditor may not allow the cardholder to use it for other purchases until the card is in good standing.

Additionally, if the payment is 180 days late, the creditor may close the account and charge off the balance. If a creditor charges off the balance, it means that the creditor permanently closes the account and writes it off as a loss. However, the cardholder will still owe the outstanding balance remaining on the account.

In some cases, creditors will attempt to recover this debt by using their collections department. In other cases, they may sell the debt to a third-party collection agency that will try to get payments from the cardholder.

Creditors have some flexibility when it comes to working with their customers. For customers who have had financial setbacks such as losing a job, creditors may help them get back on track under FDIC regulations. Usually, this type of flexibility is available for consumers who show a willingness and ability to repay their debt.


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Alternative Options

For consumers who find themselves struggling to make their credit card payments and don’t have creditor relief programs available, there are a few other options to consider that may reduce the financial burden of making credit card payments on time.

Balance Transfer Credit Cards

A balance transfer credit card is a credit card that offers a lower interest rate or even a 0% introductory interest rate. This could allow a consumer to transfer a high-interest credit card debt to a card with lower interest — and potentially pay off the debt faster. Usually, balance transfer credit cards have introductory periods that last anywhere between six and 21 months.

Using this method can potentially be a money-saver if the consumer no longer uses the high-interest rate credit card and continues to pay down the transferred debt at the lower interest rate.

In general, consumers need a solid credit history to qualify for a balance transfer credit card. If approved, consumers can use the new credit card to pay down high-interest debt. Therefore, this can be a solution for credit card debt repayment, as long as the cardholder can pay off the debt before the introductory period ends.

However, if the balance isn’t repaid before the introductory period ends, the interest rate typically jumps up. At this point, the balance will begin to accrue interest charges, and the balance will grow.

Home Equity Loans

With fixed-rate home equity loans, some homeowners may qualify for a lower interest rate using their home as collateral rather than using an unsecured loan (a loan that’s not backed by collateral). Like other types of home equity lines of credit, the terms and interest rate a borrower might qualify for is based on a variety of financial factors.

It’s important to note that borrowing against a home doesn’t come without risks, such as leaving the homeowners vulnerable to foreclosure if they don’t pay back the loan.

Credit Card Consolidation

For borrowers who may not want to use their home as collateral but are struggling to pay down debt, debt consolidation with a personal loan may be a better fit for their situation. Essentially, borrowers use a personal loan with better terms and a lower interest rate to pay off credit card debt.

Using a personal loan to consolidate credit card debt can make monthly payments more manageable and potentially lower payments. Although a credit card debt consolidation loan won’t magically make debt disappear, paying off the balance might make a difference in a person’s overall financial outlook.

However, note that some lenders may charge origination fees, which can add to the total balance you’ll have to repay. You may also have to pay other charges, such as late fees or prepayment penalties, so make sure you understand any fees or penalties before signing the loan agreement.

The Takeaway

Staying on top of credit card payments can be difficult during times of financial hardship. Fortunately, you might have options when it comes to delaying credit card payments. Some credit card companies offer pandemic-related debt relief programs to qualifying customers. Or, you could choose to explore alternative options for getting out of debt for good. One solution to help accelerate debt repayment is a credit card consolidation loan, which may be worth looking into if you’ve been making on-time payments on more than one credit card and meet the lender’s income and credit score criteria.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

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A recession is a period of general economic contraction. Recessions are typically accompanied by falling stock markets, a rise in unemployment, a drop in income and consumer spending, and increased business failures.

Recessions tend to have a wide-ranging economic impact, affecting businesses, jobs, everyday individuals, and investment returns. But defining what, exactly, a recession is, and the long-term repercussions they may have on personal financial situations is tricky.

Different Recession Definitions

A recession is often defined as a drop in gross domestic product (GDP) — which represents the total value of goods and services produced in the country — for at least two quarters in a row. However, this is not an official definition of a recession, and instead, is just a shorthand that some economists and investors use when analyzing the economy.

Recessions are officially defined and declared by the Business Cycle Dating Committee at the National Bureau of Economic Research (NBER). So, when GDP dropped two straight quarters in 2022 (Q1 and Q2), the NBER didn’t declare a recession because other indicators, such as unemployment, didn’t necessarily align with a recessionary environment.

Consumers and workers may believe that the economy is in a recession when unemployment or inflation rises, even though economic output may still be growing. That can affect all sorts of things, including the stock market, and put a damper on investors’ hopes as they trade stocks and other securities.

Recommended: Recession Survival Guide and Help Center

NBER’s Definition

The NBER defines a recession as a significant and widespread decline in economic activity that lasts a few months. The economists at the NBER use a wide range of economic indicators to determine the peaks and troughs of economic activity. The NBER chooses to define a recession in terms of monthly indicators, including:

•   Employment. Job growth or job loss can be used to gauge the likelihood of a recession, and serve as a litmus test of sorts for which way the economy is moving.

•   Personal income. Personal income can play a direct role in influencing recessionary environments. When consumers have more personal income to spend, that can fuel a growing economy. But when personal income declines or purchasing power declines because of rising interest rates, that can be a recession indicator.

•   Industrial production. Industrial production is a measure of manufacturing activity. If manufacturing begins to slow down, that could suggest slumping demand in the economy and, in turn, a shrinking economy.

These indicators are then viewed against the backdrop of quarterly gross domestic product growth to determine if a recession is in progress. Therefore, the NBER doesn’t follow the commonly accepted rule of two consecutive quarters of negative GDP growth, as that alone isn’t considered a reliable indicator of recessionary movements in the economy.

Additionally, the NBER is a backward-looking organization, declaring a recession after one has already begun and announcing the trough of economic activity after it has already bottomed.

Julius Shiskin Definition

The shorthand of using two negative quarters of GDP growth can be traced back to a definition of a recession that first originated in the 1970s with Julius Shiskin, once commissioner of the Bureau of Labor Statistics. Shiskin defined recession as meaning:

•   Two consecutive quarters of negative gross national product (GNP) growth

•   1.5% decline in real GNP

•   15% decline in non-farm payroll employment

•   Unemployment reaching at least 6%

•   Six months or more of job losses in more than 75% of industries

•   Six months or more of decline in industrial production

It’s important to note that Shiskin’s recession definition used GNP, whereas modern definitions of recession use GDP instead. GNP, or gross national product, measures the value of goods and services produced by a country both domestically and internationally. Gross domestic product only measures the value of goods and services produced within the country itself.

How Often Do Recessions Occur?

Economic recessions are a normal part of the business cycle. According to the NBER, the U.S. experienced 33 recessions prior to the coronavirus pandemic. The first documented recession occurred in 1857, and the most recent was caused by the Covid-19 pandemic, which started in February 2020 and ended in April 2020.

Since World War II, a recession has occurred, on average, every six years, though the actual timing can and has varied.

How Long Do Recessions Last?

According to the NBER, the shortest recession occurred following the onset of the Covid-19 pandemic and lasted two months, while the longest went from 1873 to 1879, lasting 65 months. The Great Recession lasted 18 months between December 2007 and June 2009 and was the longest recession since World War II.

If you consider the other 12 recessions following World War II, they have lasted, on average, about ten months.
Periods of economic expansion tend to last longer than periods of recession. From 1945 to 2020, the average expansion lasted 64 months, while the average recession lasted ten months.

Between the 1850s and World War II, economic expansions lasted an average of 26 months, while recessions lasted an average of 21 months.

The Great Recession between 2007 and 2009 was the most severe economic drawdown since the Great Depression of the 1930s. This recession was considered particularly damaging due to its duration, unemployment levels that peaked at around 10%, and the widespread impact on the housing market.

6 Common Causes of Recessions

The causes of recessions can vary greatly. Generally speaking, recessions happen when something causes a loss of confidence among businesses and consumers.

The mechanics behind a typical recession work like this: consumers lose confidence and stop spending, driving down demand for goods and services. As a result, the economy shifts from growth to contraction. This can, in turn, lead to job losses, a slowdown in borrowing, and a continued decline in consumer spending.

Here are some common characteristics of recessions:

1. High Interest Rates

High interest rates make borrowing money more expensive, limiting the amount of money available to spend and invest. In the past, the Federal Reserve has raised interest rates to protect the value of the dollar or prevent the economy from overheating, which has, at times, resulted in a recession.

For example, the 1970s saw a period of stagnant growth and inflation that came to be known as “stagflation.” To fight it, the Fed raised interest rates throughout the decade, which created the recessions between 1980 and 1982.

2. Falling Housing Prices

If housing demand falls, so does the value of people’s homes. Homeowners may no longer be able to tap their house’s equity. As a result, homeowners may have less money in their pockets to spend, reducing consumption in the economy.

3. Stock Market Crash

A stock market crash occurs when a stock market index drops severely. If it falls by at least 20%, it enters what is known as a “bear market.” Stock market crashes can result in a recession since individual investors’ net worth declines, causing them to reduce spending because of a negative wealth effect. It can also cut into confidence among businesses, causing them to spend and hire less.

As stock prices drop, businesses may also face less access to capital and may produce less. They may have to lay off workers, whose ability to spend is curtailed. As this pattern continues, the economy may contract into recession.

4. Reduction in Real Wages

Real wages describe how much income an individual makes when adjusted for inflation. In other words, it represents how far consumer income can go in terms of the goods and services it can purchase.

When real wages shrink, a recession can begin. Consumers can lose confidence when they realize their income isn’t keeping up with inflation, leading to less spending and economic slowdown.

5. Bursting Bubbles

Asset bubbles are to blame for some of the most significant recessions in U.S. history, including the stock market bubble in the 1920s, the tech bubble in the 1990s, and the housing bubble in the 2000s.

An asset bubble occurs when the price of an asset, such as stock, bonds, commodities, and real estate, quickly rises without actual value in the asset to justify the rise.

As prices rise, new investors jump in, hoping to take advantage of the rapidly growing market. Yet, when the bubble bursts — for example, if demand runs out — the market can collapse, eventually leading to recession.

6. Deflation

Deflation is a widespread drop in prices, which an oversupply of goods and services can cause. This oversupply can result in consumers and businesses saving money rather than spending it. This is because consumers and businesses would rather wait to purchase goods and services that may be lower in price in the future. As demand falls and people spend less, a recession can follow due to the contraction in consumption and economic activity.

How Do Recessions Affect You?

Businesses may have fewer customers when the economy begins to slow down because consumers have less real income to spend. So they institute layoffs as a cost-cutting measure, which means unemployment rates rise.

As more people lose their jobs, they have less to spend on discretionary items, which means fewer sales and lower revenue for businesses. Individuals who can keep their jobs may choose to save their money rather than spend it, leading to less revenue for businesses.

Investors may see the value of their portfolios shrink if a recession triggers stock market volatility. Homeowners may also see a decline in their home’s equity if home values drop because of a recession.

When consumer spending declines, corporate earnings start to shrink. If a business doesn’t have enough resources to weather the storm, it may have to file for bankruptcy.

Recommended: How to Invest During a Recession

Governments and central banks will often do what they can to head off recession through monetary or fiscal stimulus to boost employment and spending.

Central banks, like the Federal Reserve, can provide monetary policy stimulus. The Fed can lower interest rates, which reduces the cost of borrowing. As more people borrow, there’s more money in circulation and more incentive to spend and invest.

Fiscal stimulus can come from tax breaks or incentives that increase outputs and incomes in the short term. Governments may put together stimulus packages to boost economic growth, as the U.S. government did in 2009 and in 2020.

For example, stock market volatility increased wildly amid fears of the coronavirus pandemic and its economic fallout. To ward off recession, the U.S. government put together trillions in Covid-19 stimulus packages that included direct payments to citizens, suspended student loan payments, a boost to unemployment benefits, and a lending program for businesses and state and local governments.

Recessions vs Depressions and Bear Markets

Though recessions, depressions, and bear markets may all feel or seem similar, there are some differences investors should be aware of.

Recessions vs Depressions

When a recession occurs, it could stir up uneasy feelings that perhaps the economy will enter a depression. However, there are significant differences between recessions and depression. While recessions are a normal part of the business cycle that last less than a year, depressions are a severe decline in economic output that can last for years. Consider that the Great Recession lasted 18 months, while the Great Depression lasted about ten years.

Recessions vs Bear Markets

A recession is also different from a bear market, even though many think the two events go hand-in-hand.

A bear market begins when the stock market drops 20% from its recent high. If you look at the benchmark S&P 500 index, there have been 14 bear markets since 1945.

Yet, not all bear markets result in recession. During 1987’s infamous Black Monday stock market crash, the S&P 500 lost 34%, and the resulting bear market lasted four months. However, the economy did not dissolve into recession.
That’s happened three other times since 1947. Bear markets have lasted 14 months on average since World War II, and the most significant decline since then was the bear market of 2007–2009.

That’s why it’s important to keep in mind that the stock market is not the same as the economy, though they are related. Investors react to changes in economic conditions because what’s happening in the economy can affect the companies in which investors own stock.

So, if investors think the economy is growing, they may be more willing to put money in the stock market. They will likely pull money out of the stock market if they believe it is contracting. These reactions can function as a sort of prediction of recession.

Recommended: Bear Market Investing Strategies

Is It Possible to Predict a Recession?

Economists and investors try to predict recession, but it’s difficult to do, and they often end up wrong. Economists usually frame the possibility of a recession as a probability. For example, they may say there’s a 35% chance of a recession in the next year.

There are several methods economists use to try to predict recessions. Some of the most common include analyzing economic indicators, such as employment and inflation, as well as consumer and business confidence surveys. Economists build models with these economic indicators as inputs, hoping the data will help them determine the path of economic growth. While these methods can indicate whether a recession might be on the horizon, they are far from perfect.

One issue in predicting a recession is that a lot of data analysts use to forecast the economy are backward looking indicators. These data, like the unemployment rate or GDP, present a picture of the economy as it was a month or more prior. Using this data to paint a picture of the present economy becomes difficult and adds to the complexity of predicting a recession.

However, many analysts believe the yield curve is the best indicator to help predict a recession. When the yield curve inverts, meaning that the interest rate on short-term Treasuries is higher than on long-term Treasuries, it is a warning sign that the economy is heading to a recession. An inverted yield curve has occurred before all 10 U.S. recessions since 1955. Notably, however, the yield curve inverted in 2022, and a recession did not subsequently occur (yet).

The Takeaway

Recessions are periods of economic contraction, and are usually accompanied by rising unemployment and a falling stock market – though that’s not always the case.

The possibility of a recession can be unsettling, causing you to think of economic hardships and spark fears of personal financial troubles. However, recessions are a regular part of the business cycle, so you should be prepared for one if and when it comes. When it comes to investing, this means building and maintaining a portfolio to meet long-term goals.

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About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.