How to Handle Credit Card Debt When Unemployed: 7 Proven Strategies [2025 Guide]

Unemployment can affect your ability to get ahead financially. When all your money has to go to day-to-day living expenses, there isn't much room for debt repayment or saving. 

It's a real challenge and one that plenty of people face. While the unemployment rate is nowhere near the peak of 15% that was notched in 2020, it’s over 4% and rising. Meanwhile, the typical borrower has $6,371 in credit card debt on average. If you're unemployed, finding credit card debt relief might be a top priority.

Getting help with your debt could lighten your load financially and mentally. You might not be able to wipe your debt out overnight, but you can get a better handle on the situation. That could make it easier to refocus on finding a new job and get some income flowing in again. 

Let's look at some realistic solutions for dealing with credit card debt when you're unemployed. 

Immediate Actions to Take When You Lose Your Job

A job loss or layoff can leave you reeling, but quick action can help you stay on solid ground. Here's what to do first when you find yourself unemployed.

• Call your creditors. If there's any danger at all that you won't be able to make your credit card payments, call your credit card companies ASAP. Let them know your situation and ask them what solutions they might be able to offer, if any. 

• Document your hardship. You might need proof of a financial hardship to qualify for certain types of debt relief. Create a paper trail of your hardship by documenting the circumstances of your unemployment, when it began, your loss of income and your expenses. 

• Prioritize expenses. A job loss means your paycheck goes up in smoke, but your expenses unfortunately don't go away as easily. Review your expenses and prioritize what's essential and must be paid, versus what can wait or be cut out altogether. 

• Stop automatic payments. If you have automatic or recurring payments set up, you might want to cancel those to avoid overdrafting your bank account. You can always resume them later once your income stabilizes. And you may find that some of those subscriptions you were paying for aren't really worth keeping.

• Create an emergency budget. An emergency budget is a bare-bones spending plan. If you've already prioritized your expenses, start with those to make your budget. Add them up and subtract them from any income you can expect from unemployment benefits, side hustles, or withdrawals from savings. 

• Apply for unemployment benefits. Unemployment compensation won't replace your paychecks, but it can bring in some money until you're back on your feet. The average weekly benefit is $459, though your state could offer more or less. Contact your local unemployment office to learn whether you qualify for benefits and how to apply for them. 

If you received any severance pay, consider the best way to use it. For example, if you can bring in some income with side hustles or unemployment benefits, it could make sense to put your severance into  savings and only pull it out if things get truly dire. 

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Understanding Credit Card Hardship Programs

A credit card debt relief program may be just a phone call away if your creditor offers a hardship program. Credit card hardship programs could bring relief to people who are going through a tough time financially.  

A hardship program is different from your regular payment program, since it conveys certain benefits that are designed to help you stay afloat. Hardship programs won't reduce the amount you owe, but they could help in other ways.

For example, your credit card company might agree to:

• Temporarily reduce your interest rate (which is a plus, since the average credit card APR is around 21%)

• Waive or reduce certain fees, like annual fees or late fees

• Lower your monthly payments

• Let you pause payments for a specified time

These benefits may last for 12 to 24 months—it varies by the program and the details of your hardship. 

How do you qualify for this help? You'll need to be able to prove  financial hardship to the credit card company. If you filed for unemployment benefits, a letter or other documents showing your application status might be enough to get approved. You may also be asked for copies of your bank statements, pay stubs, tax forms, or other proof of income and assets. 

Once you're in the plan, you'll need to meet the credit card company's requirements to stay enrolled. If a minimum payment is due, for example, you'll need to make sure it's paid on time every month. You may also be restricted from using your card to make new purchases while you're in the program. 

Do credit card hardship programs affect your credit scores? Possibly. 

Your credit card company might add a note to your credit file stating that you're enrolled in a hardship program. That won't affect your credit scores directly, but your scores could take a hit if your creditor decides to close your account altogether. Late or missed payments could also ding your score. 

Ask your credit card company to explain the details before you enroll in a hardship program. Take note of how long your enrollment will last, what benefits you'll get, and what might affect your ability to stay in the program. 

How to Get a Debt Consolidation Loan While Unemployed

Debt consolidation is a way to bring multiple debts into one payment. Ideally, your consolidation loan is at a lower interest rate compared to the debts you want to consolidate. A lower rate could lower your monthly payments or save you money in the long run. 

You don't need to have regular employment to get a debt consolidation loan. However, you do need to have some sort of income. How much income, and what your loan options are, will depend on whether you also have:

• Assets or other collateral

• Good credit scores

For example, if you have income from a side hustle or rental property and good credit, you may qualify for a balance transfer credit card or personal loan with a decent rate.

Similarly, if you own your home and have some source of income, you may qualify for a home equity line of credit (HELOC). These types of loans are secured by your home, so they can be easier to get. If you don’t repay the debt, you could lose your home. 

How to Consolidate Your Credit Card Debt With Bad Credit

Loans and credit cards are probably off the table if you have bad credit and no assets, even if you have a secondary source of income. You're not out of options, though.

Negotiate with your creditors for debt settlement

Debt settlement isn't consolidation, but it could help you deal with unsecured debt. In debt settlement, your creditors agree to accept less than you owe and forgive the rest.

You could negotiate with your creditors on your own or hire a professional debt settlement firm to attempt to settle your debts for you. Here's how debt settlement works:

• Negotiation process. This starts with looking at your income and assets to decide how much you can pay toward your debt. Then either you or your debt settlement company would negotiate with your creditors. The goal is to convince them to accept less than the full amount you owe. The key to this is demonstrating that you couldn’t reasonably afford to pay any more than what you’re proposing. 

• Monthly deposits. During the negotiation process, you should regularly set aside some money. This can go toward making a settlement offer more attractive to your creditors. The amount of income you have available for monthly deposits may be very limited during unemployment. In that case, you may have to consider putting savings or other assets toward debt settlement. 

• Impact on credit. You may not be able to make debt payments during the negotiation period while you’re saving money for settlement offers. If you stop paying your debts, expect your credit to suffer. Your creditors may pursue you for collection, including by filing lawsuits. Even if you don’t pursue debt settlement, your credit score could suffer if you're struggling to make payments or have fallen behind. 

Debt settlement is one strategy for putting your debts behind you. Once your finances are stable, you’ll be in a better position to rebuild your credit standing. 

Eligibility for debt settlement while unemployed

Debt settlement companies generally ask you to put aside some of your income for a settlement offer. This might be difficult if you’re unemployed. In that case, some debt settlement companies may make allowances for this situation:

• Flexible solutions. Some debt settlement companies may tailor an approach to fit your resources. If you’re unemployed, this may involve considering alternatives to using a portion of your regular income. 

• Options for the unemployed. Alternatives to regular income may include savings, severance pay, or unemployment benefits. You may also have other assets to tap into. Look for a debt settlement company that will understand your situation. That way, they can help you explore whatever options are available.  

If you have no income and no money, bankruptcy might be an option to consider.

Get a Debt Management Plan (DMP) From a Credit Counselor

If you have enough secondary income to make debt payments, you could try credit counseling from a nonprofit credit counseling agency. Credit counselors go over your finances with you, answer questions, and help you create a budget. 

A credit counselor may also help you establish a debt management plan if you qualify. Under a DMP, the counselor will contact your creditors to try to negotiate a lower interest rate on your debts and perhaps get some fees waived. 

They’ll establish a repayment plan that consists of one monthly payment you make to the credit counseling agency. The agency will then pay your creditors on your behalf. This consolidates all of your enrolled credit card debts into one payment that may be easier to manage.

How to Take Stock of Your Credit Card Debt When You Lose Your Job

Losing a job isn't pleasant, especially when it's unexpected. If you have credit card debt, reviewing what you owe is the first step when you need to figure out an action plan.

Here's how to take stock of your credit card debt:

• Make a list of your credit cards, including the creditor’s name and the current balance.

• Note the minimum payment for each one and the monthly payment you've been making up to this point. 

• Review your monthly due dates.

• Look at any automatic or recurring charges that are linked to your card. 

If you can cancel any automatic or recurring charges, that should help keep your balances from increasing. For example, if you normally charge streaming subscriptions to your card, you might want to cut those expenses out of your budget temporarily. 

The goal here is to get a better idea of what you owe and where credit card debt payments fit into your budget. You can also consider downloading a free budgeting app that gives you an overview of all of your accounts in one place.

4 Steps to Take When You're Unemployed and Struggling to Pay Your Bills

Paying at least the minimum due on your credit cards while unemployed can keep you from falling behind. However, if you've run the numbers and you don't think you'll be able to manage your credit card payments or other bills while unemployed, there are a few things you can do to cope.

1. Contact your creditors

When credit cards go unpaid, you can eventually land in default. That can lead to your account being sent to collections and in a worst-case scenario, your creditor might sue you for the balance.

Credit card issuers don't want that and you don't either, since a creditor lawsuit can hurt your credit and‌ result in wage or bank account garnishments. If you're worried about making your payments on time, it's smart to reach out to the credit card issuer as soon as possible.

It helps to have a script to follow. Here's what you might say when communicating with your creditors. 

Hello, my name is [your name] and I've been a customer for the past [X] years. I recently became unemployed because of circumstances outside my control, and I'm calling to ask about possible debt relief options for my account ending in [XXXX].

Do you have a credit card hardship program for people who are going through a job loss? I want to stay on top of my debt, but I need some help to do it. I was wondering if it would be possible to get my rate reduced/lower fees/temporarily pause payments.

I can provide proof of my hardship. I've applied for unemployment benefits, but I'm waiting for those to kick in. What do you think would be the best way to handle this?

This script lets your creditor know right away that you need help and are looking for options. If the person you're speaking to seems unwilling to offer any help, you can ask to speak to their supervisor and repeat the details of your situation.

2. Apply for government aid

There's no federal credit card debt relief program, but you might qualify for other types of aid that can help you pay the bills. 

For example, you might be able to get:

• Unemployment benefits. Unemployment compensation pays you money weekly when you lose a job through no fault of your own. Eligibility and the amount you can collect is determined by individual states. Your state’s unemployment website should be able to walk you through the application process and explain how long you'll be able to claim benefits, if you qualify.

• Help with utility bills through the LIHEAP program. LIHEAP is a federal program that assists low-income households with their electric, water, and other utility bills. LIHEAP can also offer grants to help you make energy-efficient improvements to your home. The program is administered at the state level, and eligibility is based on income and family size.

• Supplemental Nutrition Assistance Program. The SNAP program provides food assistance to individuals and families who are experiencing financial hardship. You'll need to be within the income thresholds for your state and household size to qualify. If you're eligible, you'll get a debit card that you can use to buy food at participating stores.

• Temporary Assistance for Needy Families (TANF). The TANF program provides cash payments to families with children. If you're unemployed and have kids to support, you may qualify for benefits. TANF can also help with job training or child care, so you can look for work. 

• Federal student loan forbearance. If you have federal student loans, forbearance programs can help you pause payments temporarily. You can contact your loan servicer to complete a forbearance application. You can also talk to your servicer about ways to pay your loans based on your income if you want to pay less each month. 

• Medicaid. Medicaid provides health insurance for low-income families and individuals. This is different from Medicare, which is government-sponsored health insurance for seniors 65 and older. Medicaid can help you pay for things like check-ups, dental visits, and eye exams until you're able to get a new job with health insurance benefits.

• Food banks and churches. Food banks offer food packages to people in need. You may need to show proof of hardship to qualify, and there may be limits to how many times you can visit the same food bank weekly or monthly. Churches, meanwhile, may offer food assistance or help with utility bills and rent. 

If you're not sure what else you might qualify for, your local social services office is a good place to start. Someone there should be able to tell you what type of federal or state government aid programs you may be eligible for and how to apply for them. You can also check out 211.org, which can help you find local assistance resources in your area.

Keep in mind that some types of aid may be faster in arriving than others. You could walk into a food bank or church and get help the same day, for instance. But any federal benefits you apply for may take several weeks or months to get approved. Unemployment benefits usually take a couple of weeks to kick in after you apply. 

3. Watch your budget

Fine-tuning your budget while you're unemployed can help you cut out any unnecessary spending. Some of the things you might try to reduce or cut include:

• Streaming services

• Gym memberships

• Eating out

• New clothes

• Hobbies or recreation that cost money

• Entertainment (i.e., going to the movies, buying concert tickets, etc.)

• Travel

What you cut can depend on your budget categories and how much income you have to work with. The more you can trim, the further your money can go. 

4. Try avoiding running up more debt

Being unemployed with credit card debt can be a catch-22—because you might need to use your cards to cover basic expenses.

That's completely understandable if you haven't been able to get unemployment benefits yet or you don't have a lot of money in emergency savings to pay the bills. But it's a good idea to avoid using your cards if you can. 

The less you have to rely on credit cards (or loans) to get by until you're able to find a new job, the less debt you're adding to the pile. 

Manage Credit Card Debt During Extended Unemployment

The average unemployed person is without a job for 24 weeks, according to the Bureau of Labor Statistics. If you don't have a sizable emergency fund to fall back on, you'll need a plan for dealing with credit cards during an extended period of unemployment. 

Here are some strategies for navigating your debt while you look for a new job. 

• Create a month-by-month plan. Your finances may look different in Month 1 of unemployment versus Month 3 or Month 6, and your financial plan should reflect that. You can make a broad plan to pay at least the minimums to your credit cards each month. At the start of each month, you can review your budget to figure out if you have any extra money to send to debt. A monthly debt review could also help you decide if you need more than just budgeting to make it through a hardship.

• Prioritize payments. If you can only pay the minimums on your cards, there's no shame in that. But you may need to decide who gets paid first. Ideally, you pay all your cards on time so you don't get hit with late fees or negative marks on your credit report. Consider whether you may need to adjust your due dates. Your credit card companies might be willing to adjust your due dates for you so it's easier to stretch your unemployment benefits or other income you might have.

• Protect your credit. Financial hardships can wreak havoc with your credit if you miss payments or your debt balances balloon because you need credit cards to cover expenses. You could protect your score by paying all bills on time and limiting how often you use your cards (or freezing them altogether). If you can make even a slight dent in your debt during this time, that's a plus, but not required.

When should you consider debt settlement as an option? If you're about to miss your credit card payments, or you're already late, settlement could be the answer. 

Debt settlement means you negotiate with creditors to get them to agree to accept less than what's owed. This debt relief option is usually best for people who mostly owe credit cards, can afford to make one low monthly payment, and want to get rid of debt sooner rather than later. 

If debt collectors are calling or you're being sued for credit card debt, talk to a debt expert about settling what you owe. At Freedom Debt Relief, our professional team is trained to help you settle your debts and reclaim your financial life. Learn how Freedom Debt Relief works and who we help. 

Compare Debt Management Strategies

If you're trying to stay on top of your credit cards while unemployed, you've got some options. Comparing each one can help you decide which path makes the most sense for your situation. 

Here are some of the different ways to approach credit card debt when unemployed.  

Build Financial Resilience While Job Searching

You want to get back to work as soon as you can. While you're searching for jobs, you can also work on strengthening your financial survival skills. Here are a few final tips to help you manage credit card debt while unemployed and come out stronger on the other side. 

• Find a balance. Looking for work may be your top priority, but it's hard to concentrate on your job search if you're worried about your debt. As you plan your day, decide how much time you want to allocate to your job hunt and how much you want to spend managing debt. Put those time blocks on your calendar, with a break in between, so you have some time to recharge before you move on to the next task.

• Try a side hustle or gig work. Side hustles may not make you rich, but they can help you cover the bills as you look for a new job. For example, you might try doing gig work as an Uber driver, delivering food for DoorDash, or shopping for groceries with Instacart. Those are all gigs that require a car, but they're flexible and you can get paid the same day.

• Use your skills. You might have some skills that you could use to make money. For example, if you're an expert at graphic design or writing, you could list yourself as a freelancer on Fiverr. Or you could flex your skills locally by doing yardwork or handyman repairs. 

• Keep in touch with your creditors. If you're enrolled in a credit card hardship program, your creditors may want to stay updated on your job search progress. That could be a bargaining chip for you if you can show that you're making an honest effort to find a job, but aren't getting results. Your creditors may be willing to extend your enrollment in a hardship program or offer more favorable terms. 

Once your job search ends and you land a new position, you can start to transition for re-entry into the workforce. You can revisit your budget and update it to account for your new income. If you've gone without certain expenses while unemployed, ask yourself if saving money on them is a habit you want to keep. 

You might be surprised at how your financial priorities change after a period of unemployment. If you find yourself with more money in your budget as you go back to work because you're spending less, you could send it to your debt instead or use it to build up your emergency fund. Either way, you can start your new job confident that you have a firm grasp on your financial situation. 

Still have questions about how to cope with debt while unemployed? Talk to a professional debt settlement company to weigh your options.