Credit card payment deferrals are among the many responses to economic issues brought on by the COVID-19 pandemic. The government and financial institutions are responding to economic problems in various ways. About 30% of Canadians carry a credit card balance from month to month, according to the Bank of Canada. If you’re one of them, you might worry about your credit card debt obligation amidst the pandemic.
If you’re worried about your credit card debt, there is financial relief available After all, we’re all trying to cut down expenses during this time. Learn more about minimum payment deferrals and other credit card debt relief below.
How Do Credit Card Payment Deferrals Work?
A payment deferral is precisely what it sounds like, a delay in payment. Some people incorrectly assume it forgives the debt. You will still owe your entire balance at some point, but you can defer during the COVID-19 pandemic. If you apply, you will receive a payment deferral on your minimum payments. It’s ideal if you can make the minimum payments through the COVID-19 crisis on your own. You can seek other assistance to alleviate financial stress.
To take advantage of this relief, you’ll first need to apply for credit card payment deferrals. They are not automatic despite the COVID-19 crisis. This means that your credit card provider could disagree with your application. But if you’re approved, you can defer minimum payments and interest payments. Your interest will continue to accrue on your balance even when deferring payments. That interest and the balance will become due at some point.
What Companies Are Offering Credit Card Deferrals?
Below is a list of Canadian financial institutions that are providing credit card debt relief. Payment deferrals are typically allowed for one to six months. This deferral period varies from provider to provider.
Royal Bank of Canada (RBC)
RBC is offering a payment deferral on credit cards for a maximum of one month. If you want to request a longer deferral period, you will need to book an appointment with an RBC advisor. Interest will continue to accrue.
During the relief period, 50% of the charged interest credits to your credit card account. RBC has not provided criteria for credit card payment deferral on its website. Instead, they encourage you to apply online.
Toronto-Dominion Bank (TD)
TD is offering up to three months of payment deferrals for credit cards. If you’re approved, interest will still accrue. But, TD will credit you 50% of the interest charged for three months. The credit can take up to 30 days to appear on your statement. You can apply for minimum payment deferral and interest rate relief online.
The criteria states you:
- Must not have received previous interest rate relief on your credit card due to COVID-19.
- Are the primary account holder.
- Cannot apply for credit card payment deferrals with a business credit card.
- Must prove financial hardship. This includes proof of support from the Canada Emergency Response Benefit (CERB) or Employment Insurance (EI).
Canadian Imperial Bank of Commerce (CIBC)
Once approved, you can defer credit card payments for a maximum of three months. You will also receive a reduced interest rate of 10.99% during the deferral period. Additionally, you can apply for credit card relief online by filling out their form. You may be eligible for financial assistance on business credit cards. You’ll need to apply for this relief separately.
Bank of Nova Scotia (Scotiabank)
If you qualify for financial relief, you won’t need to make minimum payments during the deferral period. The deferral period is three months. Interest will continue to accrue, but the interest rate will decrease to 10.9%. The reduced interest applies to purchases and cash advances. Credit card insurance premiums will continue to charge your credit card. You can apply for relief online. You may not qualify if you haven’t made a payment for three consecutive months.
Bank of Montreal (BMO)
BMO credit card users could obtain up to six months of payment deferrals. You can apply through online banking or by using this form.
National Bank of Canada (NBC)
NBC is offering a monthly payment deferral of up to 3 months. You could also receive a reduction in your interest rate to 10.9%. The reduced interest rate applies to both purchases and cash advances. No interest accrues on interest. NBC is also offering a temporary increase in credit card limits for up to three months. You can apply for credit card payment relief through NBC’s mobile app or online banking.
Desjardins is offering principal and interest deferrals for up to six months. Interest will decrease to 10.9% during the deferral period as well. Interest will continue to accrue during the deferral period. You can apply for financial relief via Desjardins online banking. Approval is on a case by case basis, but below is the minimum criteria to qualify:
- Cannot work due to travel restrictions.
- Contracted COVID-19 and cannot work.
- In quarantine.
- Experiencing loss or reduced income.
- Financially impacted by COVID-19 in other ways.
What About Other Credit Card Providers?
If your credit card issuer isn’t listed above, that doesn’t mean credit card relief isn’t available. Research your issuer’s website to determine what COVID-19 financial assistance is available. You can also email, book an appointment, chat online, or call your credit card issuer for information.
What will happen to my credit score?
Your credit score should not suffer as a result of a credit card payment deferral. Deferred payments do not count as missed to the credit bureau.
However, keep an eye on your credit score and report. If you see a credit card payment marked as missed, report the error to the credit bureau. You can also add a statement to your credit report. The statement should explain that you’re experiencing financial struggles due to COVID-19. This way, if anyone notices damage to your credit, they’ll have an explanation.
What Should I Do If I’m Not Approved?
Approval is not guaranteed, unfortunately. If you don’t get approved, do your best to make the minimum payments. This will ensure the preservation of your credit until you can afford to make more significant payments. In addition, continue to apply for other forms of financial relief. The idea is to reduce your expenses as much as possible. There are different ways to do this, aside from credit card payment deferrals.
Consolidated Credit Can Help
During the COVID-19 pandemic, you must stay on top of your finances. There are other options available aside from credit card payment deferrals. You can also take advantage of budgeting tactics and financial planning tools. This will ensure you financially survive the pandemic. If at any point you need help, reach out to Consolidated Credit to speak with a specialist!