Banks Are Adapting to Meet New Needs Because of Coronavirus
Long before the COVID-19 pandemic reached the United States, many Americans were already strapped for cash. According to a Northwestern Mutual Study from 2019, the average American has about $29,800 in personal debt, excluding a home mortgage, and 78% of Americans are at least somewhat concerned about being able to afford a comfortable retirement.
Now, with millions of Americans out of work and filing for unemployment, people are experiencing ever-worsening financial struggles. They don’t know if they will have jobs after the crisis, let alone how they’ll afford their rent or mortgage or pay off their credit card balance in the meantime. They may be wondering things like, “Should I take money out of the bank?” or “Should I apply for a personal loan?”
Thankfully, they may not have to take extreme measures in order to get by. Banking during the coronavirus doesn’t have to be stressful since financial institutions and government agencies are stepping up for consumers and making it a little easier on them at this time of crisis.
If you’re facing financial difficulty because of the pandemic and need a little bit of help, here are some of the ways in which banks are responding.
Coronavirus Mortgage Relief
The federal government has stepped up to help Americans in numerous ways, the first being providing coronavirus mortgage relief. If you have a federally backed mortgage, the Coronavirus Aid, Relief and Economic Security (CARES) Act applies to you.
According to the Consumer Financial Protection Bureau, there is a foreclosure moratorium, as well as a right to forbearance for homeowners who are going through financial struggles because of the coronavirus.
Essentially, you won’t get foreclosed on at this time, so the bank can’t seize your house if you stop making payments. Forbearance means that your lender will allow you to reduce or pause your mortgage payments right now.
If you have a Fannie Mae or Freddie Mac mortgage, you will not incur any late fees, your delinquencies (late payments) won’t be reported to credit reporting agencies and foreclosure and other legal proceedings will be suspended. Many states are providing other coronavirus mortgage relief options. You can log onto your state government’s website to find out what relief is available to residents in your state.
Coronavirus and Banks
Banks are providing customers with a number of different choices at this time. They are lowering interest payments, allowing customers to defer payments and removing penalties for late payments, for instance.
Specifically, here’s what some financial institutions are doing for their customers.
- Ally Bank is waiving fees for things like transactions on savings and money market accounts, overdrafts and expedited checks and debit cards until July 18, 2020.
- Bank of America is allowing customers to defer payments as well as get refunds for late fees on their small business loans.
- Citi is waiving late fees and deferring minimum payments for two months for eligible credit cardholders.
- Wells Fargo is offering payment deferrals, fee waivers and other assistance for auto, credit card, personal lending and small business customers.
If your financial institution is not listed here, visit their website and see what kind of support they are providing to customers at this time.
Coronavirus and Interest Rate Reduction
In March, the Federal Reserve lowered the target range for the federal funds interest rate to nearly zero. They did this to help the American economy. According to Freya Kuka, a personal finance blogger at Collecting Cents, this indirectly affects the way consumers use their credit cards, along with what they can expect from their interest rates.
“The benchmark federal funds rate affects the rate at which banks lend money to each other and therefore affects the rates at which banks lend money to their customers,” Kuka says. “Because of this direct connection between card issuers and the Fed's lower benchmark interest rates, cardholders can expect a decrease in their own credit card interest rates.”
Contacting Your Financial Institution
When it comes to coronavirus and banks, you can’t simply stop paying off your credit card balance, mortgage, student loan or any other loan you’ve taken out and expect nothing bad to happen. Simply put, banking during the coronavirus doesn’t mean that you can neglect your financial responsibilities.
Instead, you need to contact your bank right away either by phone or online and ask what options you have if the virus has affected your ability to pay. Explain your situation and see how long you can suspend or lower your payments. Note that some financial institutions will still require you to pay interest, so you’re not getting off scot-free.
The coronavirus relief bill has made some coronavirus provisions for federal student loans. If you have one, you may be able to discontinue your student loan payment through September, but you should have been notified by Student Aid if you’re eligible. You can check directly with your student loan provider to see if you qualify.
More Options for Protecting Yourself
Aside from being in touch with your financial institutions, if you’ve been laid off because of coronavirus, you should apply for unemployment on your state government’s website. The amount you receive will be based on what your salary was prior to the coronavirus shutdown. Additionally, the federal government is offering an extra $600 per week to unemployed workers in some states. This boost will end on July 31 at the latest.
If you're evaluating which bills to prioritize, follow personal finance rules, just like you would if there wasn’t a pandemic. Mary Anne Keegan, CMO at BillGO, says, “Customers should always prioritize their bills based on the necessity to survive. Place higher priorities on bills to sustain housing and transportation to essential jobs.”
Banking during the coronavirus can be unpleasant and even stressful, especially if you lost your job and cannot afford to pay your bills. Just know that there are options, however, and this is only a temporary phase. By facing the situation head-on and being in touch with your bank to see what help is available to help you deal with your loans, credit cards and mortgage, you can stay financially stable and as calm as possible during this challenging time.
About the Author
- Board of Governors of the Federal Reserve System. "Federal Reserve issues FOMC statement." Accessed April 19, 2020.
- CNN. "Unemployed Workers in 29 States Now Getting $600 Boost in Benefits." Accessed April 19, 2020.
- Consumer Financial Protection Bureau. "Guide to Coronavirus Mortgage Relief Options." Accessed April 19, 2020.
- Forbes. "List of Banks Offering Relief to Customers Affected by Coronavirus." Accessed April 19, 2020.
- Northwestern Mutual. "Planning and Progress Study 2019." Accessed April 19, 2020.
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