Can I Negotiate My Credit Card Debt Down
Believe it or not, credit card companies don’t want to hire a debt collector or sue you for the amount you owe. It’s a hassle for them, and costs money.
For those deep in credit card debt a credit card company may offer multiple solutions for repayment. Options can include a lower lump sum payment, a monthly payment plan (with 0% interest), a lower interest rate, and in some cases debt forgiveness on a portion of the amount owed. This will obviously depend on your credit score, amount owed, financial situation, income, and other factors.
A good DIY debt consolidation option is to use a balance transfer. Essentially you’re paying off a high interest card with a low interest one.
After the Great Recession of 2008 the National Foundation for Credit Counseling brokered an agreement between the top 10 credit card companies to “provide relief” to struggling cardholders. At the heart of the deal, the credit card issuers agreed to open up their debt management programs to include more hardship cases.
- Those laid off from their job
- Medical emergency costs
- Workers furloughed due to the Coronavirus
The debt management programs allow a person to pay back credit card debt at a ‘reasonable” monthly payment and lower interest rates. It’s important to note that if you’re put on a debt management program they will close out your credit card, meaning that you won’t be able to use it anymore.
Below are some tips to help you negotiate with the credit card companies for lower interest or debt forgiveness.
#1. Go to your card company early.
Be open and upfront with them. Credit card companies want to know when you’re in trouble and are more likely to help you out if you come to them before they come to you. If they can lower your rate and set you up on a good payment plan, they’re more likely to get their money back.
Ideally you should talk to your creditors 60-90 days before your bill is overdue.
#2. Don’t get greedy.
Most card companies are willing to cut you a hardship deal under the right circumstances. Expect an interest rate decrease of 7-12%. You may also be able to negotiate a reduction on the principal debt, especially if you can pay off the entire amount within a year or two. However if you try to take a big slice of the debt pie away from card companies, expect them to pull back on your options. There needs to be some give-and-take from both parties.
#3. Ask to waive the late fees.
Part of getting rid of credit card debt is eliminating the penalty fees; late payments, spending over your credit limit, or annual fees. Most consumers don’t think about it, but your card issuer may well void any late fees as part of a hardship deal, but you have to ask.
#4. Ask for a hard copy of the agreement.
A deal isn’t final until until you’ve received it on paper (or through email).
The long and short of it? Card companies aren’t your friends, but they’re surprisingly amenable if you’ve fallen on hard times or have insurmountable credit card debt that you can’t pay back. So if you’re drowning in debt, get in touch with your card company and ask what your options are. In the long run, you can save a lot of money and stress!