2020 Consumer Credit Card Report

COVID-19’s widespread impact on Americans’ finances has many seeking help to cover their bills. Around 1 in 8 American cardholders (13%) in a new NerdWallet survey reported having entered into a credit card hardship program in March and April 2020 — and 9 in 10 of those who did (90%) say adverse actions were then taken on their accounts.

NerdWallet’s annual Consumer Credit Card Report is our examination of the credit card landscape and its impact on consumer finances. In last year’s report, we looked at rising interest rates and cardholders’ costly payment habits.

For 2020, it would be impossible to ignore the pandemic and its effect on consumer finances. Unemployment rates are up and financial stability is down for millions of Americans, and some are reaching out to their card issuers for assistance with payments, interest charges and fees. Plenty of them are getting this help — but not without drawbacks.

This is the 2020 edition of NerdWallet’s annual Consumer Credit Card Report. For other editions and more research, see our credit card data page.

In an April 27-29 survey of more than 1,800 U.S. adults who have a credit card, commissioned by NerdWallet and conducted online by The Harris Poll, we learned about how credit card users are coping with the financial strain brought on by the pandemic, how many have turned to hardship programs and what, if any, negative effects they’ve experienced after doing so.

Key findings

• Credit card users are feeling the financial impact of COVID-19: More than three-quarters of American cardholders (77%) say their financial situation has been affected by COVID-19. Of those, close to 3 in 5 (58%) have taken one or more steps with their credit cards to improve their financial situation, such as paying off a card in full (24%), paying less aggressively (20%) or shifting high-interest balances to a 0% interest card (12%).

• Issuer assistance is a go-to for many cardholders: Almost a third of American cardholders (31%) say that if they couldn’t make their minimum payment, their first step would be to call their card issuer for help. More than 2 in 5 cardholders (42%) say they’d first dip into emergency savings to cover their payment.

• Hardship programs popular in recent months: According to the survey, around 1 in 6 American cardholders (16%) say that they had tried to enter into a hardship program in March and April 2020. Most of those people (80%) were able to get into one.

• Help comes with negative consequences: Of cardholders who entered into a hardship program in March and April 2020, a whopping 90% say adverse actions were taken against them, such as reduced credit card limits (61%) or temporarily frozen accounts (29%).

Cardholders take action to manage COVID-19’s financial impact

About 3 in 5 American cardholders who say their financial situation has been affected by the pandemic (58%) have taken some sort of action with their credit cards to improve their situation. The most common steps: paying off one or more cards in full (24%) and making smaller monthly payments to increase savings (20%).

What you can do: Paying off credit cards in full and making smaller payments are seemingly opposite approaches to improving one’s finances, but both are valid options. People who already have savings, for example, may want to eliminate the cost and stress that comes with carrying credit card debt, while those who want to bolster their savings may pull back on debt payments while they build up their emergency funds. Some people may choose to balance the two.

“It can make sense, if your source of income is stable, to pay down debt and add to your emergency fund at the same time,” says Sara Rathner, NerdWallet’s credit card expert. “Tackling multiple financial goals at once, if your budget allows, helps you build a strong foundation that helps you weather all sorts of unexpected situations.”

Other actions taken by respondents include seeking a higher credit limit, which can provide flexibility if income is disrupted, and transferring or consolidating balances to save money on interest.

The right credit card action for you is one that increases financial stability and decreases financial strain, given your job security, savings and debt balances, and risk tolerance.

Many would dip into savings or turn to an issuer for help

Many Americans have lost income as a result of the pandemic and need to prioritize which bills to pay. When asked what they would do first if they couldn’t cover the minimum payment on their credit card, more than 2 in 5 cardholders (42%) say they’d use money from their emergency savings to cover the payment if they didn’t have the cash on hand. The second most popular response: Call their credit card issuer for help (31%).

Credit card issuers have been informing customers that assistance is available if they can’t make their minimum payment normally. This might take the form of reduced, deferred or skipped payments, waived late fees, or reduced or waived interest payments.

What you can do: If you don’t have savings, there are better and less-damaging options than simply missing the payment. A missed payment can result in a hefty fee, a higher interest rate or a negative mark on your credit report that could harm your credit scores. The missed payment would be reported to credit bureaus only if it is 30 or more days late.

“If you don’t have the funds available to cover your credit card minimum payments, don’t simply stop paying your bills,” Rathner says. “If you can’t tap into savings, borrow money from family or cut expenses to free up money, call your credit card company to see what it can do to make your payments more affordable right now. Skipping payments without entering into a hardship program can lead to expensive consequences.”

16% of cardholders request hardship assistance

According to our survey, 22% of American cardholders have tried to enter a hardship program at some point. Probably because of the financial impact the pandemic has had on so many Americans, around 1 in 6 cardholders (16%) say they tried to enter a hardship program in March and April 2020 alone.

Those with household incomes of $100,000 or more are more likely to have tried to enter a hardship program in March and April 2020 than those in lower household income groups. Younger Americans (Gen Zers, ages 18-23, and millennials, ages 24-39) are more likely to have tried than older Americans (Gen Xers, ages 40-55, and baby boomers, ages 56-74).

When it comes to hardship assistance, the top form of help requested by cardholders who entered into a program in March and April 2020 was reduced minimums or deferred/skipped payments (82%), followed by reduced or waived interest payments (56%). Issuers appear to be on board, offering cardholders these options at rates similar to the requests.

While these cardholders are largely getting what they want in terms of hardship assistance, they’re finding the help comes with potentially negative consequences or strings attached.

What you can do: Enrolling in a hardship program may be the best option for you, but it’s worth exploring other options first to avoid the pitfalls that can come with hardship assistance.

“Credit card hardship programs can help, but they may come with terms that are tough to stomach,” Rathner says. “Before you go down that route, see where else you can save money so you can apply that extra cash to your credit card bills. Your landlord or local utility company may offer assistance with better terms. This could also be a good time to reexamine your budget to see if you can trim any expenses.”

The downside of assistance: New limits and restrictions

According to the survey, around 1 in 8 American cardholders (13%) say they tried and were able to enter into a hardship program in March and April 2020. Of them, a staggering 90% say that one or more adverse actions were taken against them after entering into the hardship program. Over 3 in 5 cardholders who entered into a hardship program in March and April 2020 (61%) report having their credit card limit reduced, and 40% say their account was temporarily frozen or closed.

We can’t be sure that each of these actions was the direct result of a request for hardship assistance, as opposed to prior missed payments or accounts not being in good standing. But with such a high number of cardholders experiencing negative effects, it’s worth considering that joining a hardship program may involve outcomes that hurt consumers’ ability to access credit in a time of need.

What you can do: If you need hardship assistance to pay your credit card bill, you should absolutely ask for it. But it’s important to know the costs.

“Hardship programs can be helpful in some ways but incredibly limiting in others,” Rathner says. “If you need help, hardship programs may be exactly what you need to get by in the short term, but enter into these agreements with your eyes wide open.”

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