If you are deep in the hole with credit card debt, it may be possible to negotiate some relief to make your burden something you can realistically handle. Credit card companies know that if they stick to their guns and try to collect everything they’re owed, some customers simply won’t be able to handle it and will declare bankruptcy. That does the credit card company no good, so if they fear that as a possibility, they’ll often be amenable to working out a deal where they get paid something rather than nothing.
Here are some tips for negotiating with your credit card company:
1. Check your credit report
You are entitled to one free copy a year of your credit report from each of the three major credit bureaus. This gives you the information about all your accounts in one place. Go through and see which are your biggest “problem” accounts-where you’re over the limit or close to it, where you’ve missed payments, where your interest rate is the highest, etc. These are the ones that will rack up fees and put you further in the hole. Give the highest priority to these accounts, and contact the creditors to try to negotiate some relief.
2. Get it in writing
It’s fine to also talk to the credit card company on the phone, but make sure you get any promises, any agreements, in writing.
3. Know the impact on your credit score
Some forms of relief adversely affect your credit, and some do not.
Many consumers are thrilled to reach a deal where the credit card company closes the account, and accepts a lump sum for less than the full amount owed as settlement of the account.
Certainly you can save some money that way, but that shows up on your credit report as that account having been closed without you fully paying what you owe, which looks bad and deals a big blow to your credit score.
On the other hand, among the things that typically won’t show up adversely on your credit report are alterations in fees, interest rate, and minimum payments.
It may still be your best option to settle for some lesser amount, but before you do that and further damage your credit, see if you can get a comparable amount of relief through such means as having fees waived, having your interest rate reduced, and having your monthly minimum payment reduced.
4. Obtain help negotiating
For-profit credit counseling and debt relief companies are generally bad deals, even when they’re not out-and-out scams. They often collect a sizable fee from you upfront, which puts you even further behind on your payments to your creditors, since that’s that much more money unavailable to pay them. These companies are notorious for using a lot of slick talk and vague promises to get you to use them as your middleman, with the result typically being that you only end up deeper in the hole.
On the other hand, there are non-profit consumer groups that specialize in helping you ease your credit burden. They can assist you in working out the best deals you can with your creditors. A good place to find such an organization in your area is through the website of the National Foundation for Credit Counseling.
Don’t let your debt get out of control before taking steps to deal with it. By negotiating directly with your creditors, you can often work out a better deal than you currently have with them and get considerable relief.
Elisabeth Leamy, “Negotiating Away Credit Card Debt.” ABC News.
Nancy Trejos, “Banks Ease Burden of Credit Card Debt.” The Washington Post.
“How to Negotiate Credit Card Debt.” eHow.