Are good faith payments a good idea?

If you're having a hard time paying your credit card bill, consider speaking with a credit counselor.

If you’re underwater -- or barely treading -- you might be tempted to make a "good faith" payment to your credit card issuer. Especially if your card issuer won’t work with you to lower your interest rate or minimum payment due.

A good faith payment is any type of payment on your account (even if it’s less than the minimum) as a sign that you have made an effort to pay.

And many assume that making this type of payment will lead to credit card issuers going easy on you. It's not always the case.

But if you can’t make your credit card payments, the worst thing you can do is nothing. Take some action.

Here are a few things to consider before making a good faith payment:

But keep in mind, a good faith payment could ding your credit report as well as result in late fees and higher interest rates. For instance:

Let’s say your minimum payment is $60, but you can only afford to pay $35. $25 will remain past due and be reported to credit bureaus as 30 days late. Then the following month if you only pay another $35 , not only will you once again be reported as being 30 days late, you’ll be charged interest on the past due balances.

Staying in this cycle can result in collection calls from your credit card issuer.

If you absolutely can’t make the minimum payment, you might consider contacting a non-profit credit counseling group as an alternative to good faith payments.

Utilizing a credit counselor rather than going it alone is typically kinder to your credit score (and wallet) because the counselor can convince the creditor to make accommodations.

There is typically no fee for the appointment and counseling services can work with creditors to help reduce payments, interest rates and late fee waivers.

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