In Light of Hurricane Sandy: Your Credit Disaster Plan
This post originally appeared on Credit.com.
We don’t know about you, but something in the air is making us jumpy. Maybe it’s the combination of earthquakes and hurricanes on the East Coast with wildfires in Texas, or the blackout in Southern California. These days, we’re getting lots of inquiries lately about how consumers can prepare their finances and credit for disaster, both natural and man-made.
So we’ve culled our archives, talked to our experts, and assembled all of our best disaster preparation advice in one place. We’ll put their advice in roughly chronological order, starting with what you can do now, before an emergency strikes, all the way through the steps you should take after the immediate crisis has passed.
To Do Now: Build a Strong Foundation
Go ahead and dig a bunker in your backyard. If you’re really serious about preparing for a big-time disaster, buy a room inside a luxury hotel for the post-apocalypse.
But not all disaster preparedness is so dramatic. Here are some pragmatic things you can do to get ready with just a telephone and a photocopier, and nevermind the shovel.
Take care of basics: Pay down your debt, and build up your cash reserves. What’s good advice in normal times is even better advice in a crisis. Even if your house is carried away by hurricane wind or flood waters, your credit card bill will arrive t the end of the month, just like always.
As Jean Chatzky counsels people participating in her Debt Diet Challenge, having even a few months’ savings in the bank could make it a lot easier to cope with an emergency.
“(I)t’s not enough to be debt-free,” Chatzky writes. “Having savings, an emergency cushion, a secret stash, whatever you want to call it, is like an insurance policy against incurring debt in the future.”
And keeping some room under your credit card limit could come in especially handy during an emergency, when unexpected expenses like hotel rooms could wrack up fast.
“If there’s no room on your cards for expenses, then you’ve got a big problem, especially if you can’t get access to an ATM for cash,” says Beverly Harzog, Credit.com’s credit card expert.
[Related Article: The Debt Diet Challenge Week #3: Expect the Unexpected]
Make sure you’re insured. Insurance premiums may seem like a burden. But after disaster strikes, you can’t get insurance retroactively. Make sure your car is insured, as well as your house or apartment.
Make copies. According to Harzog, it’s important to make photocopies of all your important financial information.
For each credit card, write down the card’s name, number, the toll-free number on the back, as well as payments that draw automatically from the card, like maybe a health club membership. Take down similar information on bank accounts, as well as your lease or mortgage, insurance policies, car loan, student loans.
You get the picture. If you an established financial relationship with any company, write it down, and keep it handy, maybe in a sealed plastic file folder. If you have to evacuate your house for any reason, you can grab the folder on your way out.
[Related Article: A Credit Card Checklist for Natural Disasters]
During the Crisis: Don’t Lose Your Head
If you’ve prepared well, you can focus on what matters most: Keeping yourself and your family safe. After that, be sure to:
Pay cash, if you can. As Chatzky points out, it’s easy to throw caution to the wind during an emergency, and start charging everything to credit cards. But that just compounds the crisis, since it means paying interest down the road. “If you have the cash to pay for it, you don’t have to go into hock to do it,” Chatzky says.
Pay your bills as normal. If mail service is disrupted, and if you have a working phone, call your credit card companies, mortgage servicer and others to find out how much you owe, as well as the due date. Most companies will let you make payments over the phone, sometimes for a small fee.
Call your bank. Credit card issuers monitor accounts closely to look for abnormal spending behavior, Harzog says. If you suddenly show up in a different state buying things like giant tarps and expensive generators, your bank might question or even block the purchases. Call them to let them know your situation.
Log off. If you’re using computers at libraries or coffee shops to check your accounts, make sure to log off before leaving, Harzog says.
[Featured Product: Research and Compare Secured Credit Card Offers on Credit.com]
After the Crisis: Stay on the Ball
Especially after a natural disaster, the physical damage may be spread across a wide area. As we covered after Hurricane Irene, it’s important to start your recovery quickly, since insurance companies and other service providers will quickly be deluged by people seeking help.
Here’s a more detailed list of things to do with your insurance after an emergency. Some highlights:
- Inventory your possessions, so you know what to claim. Back up your claim by hiring a private appraiser.
- File quickly, since insurance companies resolve claims on a first-come, first-serve basis.
- Keep good records. Write down descriptions of every interaction with your insurer. Also, keep all your emergency-related receipts, like restaurants and motel rooms, since you may be able to get reimbursed.