How to Negotiate With Credit Cards
You can negotiate with credit card companies in a number of ways. You can ask each of your card companies for lower monthly payments while you recover from unemployment or another hardship, and you can even ask that the majority of your credit card balance be forgiven with no obligation for you to repay. Start by calling the card company. It may require several attempts before you get what you want.
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Instructions
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Ask for a hardship program. You may be eligible for a hardship program if you are suffering from unemployment, medical bills or another crisis. Your credit card company may reduce your minimum payment to as low as 1 percent of your balance for up to 12 months and may also reduce your interest rate. Be prepared to offer details about your financial situation, including the status of your income, employment and bills. Generally, you can expect to receive an answer during the same telephone call.
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Ask for a lower interest rate. You may qualify for a lower interest rate even if you don't qualify for a hardship program. You'll need a good repayment record to qualify for a lower interest rate. Use that leverage to ask for a better rate. Negotiate by suggesting that you can get a better rate elsewhere but would like to stay with your current card company.
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Ask for a debt settlement. You can pay off your credit card for a fraction of the balance by settling. Debt settlement is one of the most powerful negotiation tools you have with credit card companies, but it has drawbacks. You'll probably have to pay off the balance in three or four months, and any amount forgiven may be treated as income by the Internal Revenue Service. That could lead to a higher tax bill.
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Start the debt settlement process after your credit card payments are about four months behind. Card companies will give up on collecting after you fall six months behind and will close the account, list it as a charge-off and sell it to a collection agency for pennies on the dollar. To avoid that, card companies will usually make settlement offers at about the four-month mark. Call your card company then, and ask for a settlement. Card companies generally will accept about half of the balance through a settlement offer and may go lower. Start by asking that your balance be reduced by 80 to 90 percent. Be prepared to make counter-offers until you have an offer that seems fair.
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Send a settlement request letter to your card company through standard mail. Call your company for the address or look on your billing statement. Keep copies of all correspondence, including follow-up letters and counter-offers. Once you have agreed on a settlement, ask the card company to send you the details in writing.
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Ask for help from a consumer credit counseling service agency. The nonprofit agencies are listed in your telephone directory and online. The agencies will work with you in negotiations with your credit card companies and can assist in getting you approved for lower monthly payments, lower interest rates and more.
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Tips & Warnings
Credit card companies aren't obligated to make you a debt settlement offer, and they could list your account as charged off at any time. Then you will have to settle with the collection agency that purchased your account.
References
- Photo Credit three credit cards image by Aleksandr Ugorenkov from Fotolia.com
