Estimates indicate that the average credit card debt for an American household is around $15k (out of households that carry balances.) Since this is an average, many households carry much more than this. The implication of that kind of credit card debt is troubling. Sure, it’s possible that some are just chronic shopaholics; but it’s more likely that they’re casualties of the still-recovering economy. All too many families afflicted by layoffs have had to resort to living off of credit cards and have maxed out more than just one. If you feel like you’re drowning in credit card debt, face the issue head-on and call them. They’re more willing to work with you than you may think.
Why They’re Willing to Negotiate
Simply put, something is better than nothing. If a customer is several payments behind, the credit card company knows there’s a chance they may never get paid back. If they negotiate with you, at least they’ll recover some of their money.
Payment Plans (Balance in Full)
There is also the option of working out a payment plan based on the amount you actually owe. Generally, this involves closing out any remaining availability on the card and setting up a monthly payment at a reduced rate over a specified period of time until the account is paid off. If you can make it work, this option is much friendlier to your credit report (assuming your account is still with the credit card company and not their collection agency.) Your account should not show as “settled” and when you complete the plan it will show on your report as paid in full. However, always confirm with the creditor exactly how the plan will be reported to the credit agencies and get it in writing.
Tips for Negotiating
- Be proactive – don’t wait until your account is in collection.
- Evaluate what you can realistically pay on a monthly basis. If you have the ability to also make an upfront lump sum payment, this is always seen as favorable to the creditor.
- Explain (briefly, no sob stories) your hardship. If you are facing the possibility of bankruptcy, tell them. They need to believe that negotiating with you is the only solution.
- Be patient and persistent. The first person you speak with likely won’t have the authority to negotiate. Even once you get to the right person, there will likely be a good deal of back and forth. Don’t accept their first offer.
- Take good notes every time you interact with them, including names of everyone you talk to.
- Get any agreed upon terms in writing (including how the agreement will be reported to the credit agencies) before making any payments.
They’ll Negotiate with Good Customers Too
If you’re not drowning in credit card debt but just looking to improve your terms, there are good reasons for you to call your credit card company for a chat as well. If you’re a good customer, they are likely to work with you to improve your rate or get rid of fees in order to keep you as a customer and remain competitive in the market. Before calling, be sure to have other credit card offers in hand so you can let them know what their competition is. Remember, if the person you reach tells you your terms are not negotiable, ask to speak to their supervisor. If they won’t budge, by all means call their bluff and transfer your balance to a card with better terms. When you call back to close your account they’ll likely offer you incentives to stay that may even be better than what you originally asked for!
With debt settlement, you “settle” with the creditor to pay an amount less than what you owe. Basically there’s only so much you can pay, they just want to get whatever they can, and you ultimately agree on a reduced amount. This should be considered a last resort since it destroys your credit. That being said, if you’re multiple payments behind your credit is likely already shot anyway. There are a ton of debt settlement companies out there that negotiate the settlement terms on your behalf (for a fee) but the better option is do-it-yourself debt settlement. Do your homework and make the call!
[titled_box title="Enter SpringCoin" variation="green" bgColor="#6ee653" textColor="#000000"]SpringCoin gets you access to existing hardship programs to lower your monthly payments. This means lower interest rates and getting out of debt quicker! They give you the best solution for you based on your financial circumstances and give you a clear road map on what to do. Even more, they help you by monitoring your spending and giving you alerts. The neat budgeting tool will give you tips on how to reduce your spending.
Check out all of your options above and determine which one fits your specific needs as there is no one size fits all option. If you’ve successfully negotiated debt in the past, please give us your tips in the comments area!