Help for Unemployed with Credit Card Debt

Unemployed and in Credit Card DebtThe psychological wounds from losing a job eventually heal, but depending on how you handle your finances, the monetary ones can reverberate long after the pink slip turns to dust. So it’s critical, as soon as you get past the shock, to take stock on your cash flow and create a plan.

First, know you’re not alone. The U.S. economy, which once offered many workers what seemed like lifetime work with a single employer, now adds and sheds jobs at a dizzying pace. Though the unemployment rate has fallen steadily over the past several years, thousands of jobs are lost every day. The good news is that it’s a great deal easier to find another one now than it was during the gloomy Great Recession of 2008.

Average Length of Unemployment in 2016

Unemployed workers were between gigs for a seasonally adjusted average of 27.7 weeks in April 2016, with a median duration of 11.4 weeks, according to the U.S. Bureau of Labor Statistics. That was down from an average of 30.5 weeks, with a median of 11.6 weeks, in April 2015.

Though the prospects for job seekers are up, the challenges of getting organized and launching a job search never change. Here are some tips for putting your finances right while you polish your resume.

How To Manage Credit Card Debt After You’ve Lost Your Job

Create An Emergency Budget

Hopefully, before your got the bad news from your boss, you had socked away cash in a bank account to keep you going for at least six months. Even if you did, it’s time to cut back spending. That means make rapid-fire decisions on what you need and what you don’t. Eating out? Forget about it. Americans spend almost 40 percent of their food budget eating out. Stay home. Wipe off the stove top and clean the microwave, because you’ll be using them more than you have for a long while.

That settled, pull out your bills and focus on the ones you pay every month, especially phone and cable. You probably need a cellphone for job searches and morale-boosting talks with family and friends, but you might not need a plan with unlimited data and international calling. See if you can cut back the options. The same goes for cable TV. Drop the premium channels for now or consider cutting the cord all together and watch streaming videos on line instead. You might discover removing TV from your life will mean more time for what matters, finding work.

Prioritize Spending

It’s a little like triage in a hospital emergency room, where the staff decides which cases need immediate treatment and which don’t. You need to pay your mortgage or rent, cover the essential utility bills and buy food. Call those Category One expenses. Then consider what you might be able to defray. Are you able to delay a car-loan payment? Can you shift to paying the minimum on your credit card? Obviously, these aren’t great long-term strategies, but they might make sense when an unemployment check is your only income.

  • Consider the options. Make sure you consider health insurance. If your former employer offers an affordable extension of your work plan, consider that. The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) allows the newly unemployed to continue their group coverage, but usually without the company subsidy that made the insurance affordable. If COBRA coverage costs more than you can pay, consider looking for a plan through 
  • Check your credit report. Employers often review job applicants’ credit scores. Order a free copy of your report and check it for accuracy.
  • Call your creditors. If you owe money, check what options might be available for reducing minimum credit card payments while you’re unemployed. Though you might be tempted to hide your employment status from creditors, they are often willing to work with you to avoid default. Many lenders maintain credit-card-hardship programs which lower monthly payments or delay payments entirely for a certain amount of time. Be aware that entering a hardship agreement probably will be entered in your credit history and likely will impact your credit score. Seeking this kind of relief should be considered a last resort, but if you can’t make minimum payments, it is worth pursuing. Remember, lenders don’t advertise hardship programs. Gather Information through online research, which you should do before you contact the lender.
  • Talk to your former employer. If you were laid off, your last employer might want to help. Some companies offer out-placement services that include job-hunting courses and generic financial advice for the unemployed.
  • Consider getting third-party help. If you have multiple creditors, try getting help from a credit counseling agency. These agencies typically specialize in working on behalf of overextended borrowers, not the unemployed, to lower interest rates and eliminate late fees. But if the loss of a job creates a major financial crisis, such help might be very valuable.

More than anything, it is important to stay calm and focused. Don’t procrastinate looking for work or training that will lead to a job. Keeping a positive attitude while bringing extreme discipline to spending will see you through this rough patch and prepare you for a bright future.


Unemployed Persons by Duration of Unemployment (2016, May 6). U.S. Bureau of Labor Statistics. Retrieved from:

Dealing with Job Loss (December 2013). Federal Trade Commission. Retrieved from:

Melia, Marilyn Kennedy. Coping with Debt When You’re Laid Off. (2009, March 3). Retrieved from:

Karp, Gregory. How to Survive Losing Your Job, in 12 Steps (2015, Aug. 28). Chicago Tribune. Retieved from: