Call Your Credit Card Company
Consumers can use a settlement company , or they can do it on their own, says Linda Jacob, a financial counselor with Consumer Credit of Des Moines. Theres no need to pay a company to settle for you. Save the fees and do the work yourself.
If youve decided to negotiate on your own behalf after weighing your options, its time to call your credit card company. First, ask for the department that handles debt settlements or collections. You may want to prepare a script beforehand, so that you know exactly how to frame your request.
Clearly and politely explain your financial situation and ask for exactly what you want. The initial answer may be no, but that doesnt mean you cant be persistent even if it takes multiple phone calls.
Document every conversation you have. Write down the names and job titles of anyone you speak to so you can reference them in follow-up calls if necessary.
You cant be afraid to ask for a supervisor or the supervisors supervisor, Sullivan says. The higher you go, the more likely you are to find someone who is willing to make a concession.
Settling Credit Card Debt Pays Off For Both Parties
Why would a credit card company let you off the hook for less than what you owe? It simply comes down to whether they want some of their money back versus none of it. Credit card debt is unsecured debt, meaning its not tied to an asset like a house or a car. So if a persons financial situation gets so dire that they file for bankruptcy, its possible a credit card company wont see any of the debt repaid.
Some people work with debt settlement companies to help them negotiate a settlement with credit card companies, but its also something you can do on your own. Debt settlement is not without its risks, however. Your credit could take a further hit and it could take years for it to recover, but its a definite option for debt relief. Heres what you need to know:
Statute Of Limitations For Credit Card Debt After Death
Every state has its own statute of limitations when collecting owed credit card balances, and payment requests must be given in writing. Depending on where the decedent resided, unsecured debts like a credit card may only have 3-6 months to be collected upon. This clock usually starts ticking when the estate executor/personal representative gives the court-required notices of the decedent’s death to alert owed companies to request. Once this period has passed, creditors can no longer submit claims to the court for owed money.
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How To Negotiate Credit Card Debt In Seven Steps
Negotiating credit card debt can be an extensive process. It can go a lot smoother if you prepare ahead of time. Start with the following steps:
Is Credit Card Settlement A Good Idea
Typically, youre advised to avoid credit card settlements because of their impact on your credit score. However, depending on your current situation, you may have no other choice but to settle. For this reason, it is important to know how to negotiate credit card debt settlement yourself, as it allows you to approach the issuer and avoids the fees associated with hiring a debt settlement agency.
The bottom line is that to avoid a situation where you need to resort to a settlement, ensure that you spend only what you can afford via your credit card and clear bills on time. Opt for a credit card issuer that allows you to make payments via multiple payment gateways to simplify the latter. The Bajaj Finserv RBL Bank SuperCard is one such option as you can pay using any of the six payment options. Among them is the RBL MyCard app that allows you to pay your bill in just a few taps. Use this feature to ensure that you never miss a .
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What Percentage Do Credit Card Companies Settle For
When you begin your efforts to settle past-due credit card debt, you may want to consider offering around 40 to 50% of your outstanding balance. But keep in mind that the debt’s age, credit, company policies, and other factors can play a role here.
Some creditors might not be willing to settle for anything less than 80%. Others might not accept anything less than the total balance you owe.Having a settlement fund means you can tell your creditor you have the cash to pay right now if they agree to a debt reduction amount that works with your budget.
If you reach a settlement agreement you can live with, get it in writing. Then, make sure you follow the terms exactly as spelled out.Be sure to document any payments you send as well. A written agreement and proof of payment can protect you if a creditor or collection agency tries to change its story after the fact.
Choose From The Settlement Options
Before you pick up the phone, understand what settlement options are available and how much you can afford to pay. Card issuers are likely to agree to one of three types of settlements: a workout agreement, lump-sum agreement, or hardship plan. A workout agreement typically involves lowering your interest rate or temporarily waiving the interest altogether. A lump-sum agreement offers to settle your outstanding debt in one substantial payment, albeit at a lower amount than the original that was owed. A hardship plan is for those experiencing a temporary financial setback and may lower your card’s minimum payment, interest rate, or fees. It’s worth noting that the choice you make will likely affect your credit score and some may even have tax implications.
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Ask For A Payment Plan
If you are willing to start making payments immediately, your creditor may be willing to offer a payment plan. Your credit card provider wants your money. If they enter into a payment plan with you, they are likely to get more money than if you default or even if they let a debt settlement company negotiate.
Your creditor will consider a couple of key factors when determining whether to offer a payment plan:
- Your payment history
Negotiating With Creditors When Things Arent Going Wrong
Even when youre not having trouble keeping up with bills, you can still benefit from credit card debt negotiation. There are benefits that you can negotiate when things are fine with your account. These can help you avoid fees and save money by minimizing interest.
Here are some good reasons to call your credit card companies when your account is in good standing:
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Handling Debt Negotiation On Your Own
When it comes to credit card debt negotiation, the CFPB says that the first thing you need to think about is why you are in debt. Is it a temporary job loss or long-term issue? Understanding how long you might be in this situation can be helpful when you call your creditors to negotiate.
During the height of the pandemic last year, many credit card companies offered deferment. Deferment allows you to temporarily stop making payments for a set period. Some creditors even allowed customers to extend deferment between 3-6 months.
Now, however, creditors are becoming less flexible with customers. But it still may be possible to negotiate for an extra deferment period or to extend your current deferment agreement.
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Nole Saves Big With Debt Settlement Negotiators
Nole also owed just over $30,000$30,093 to be exact. But unlike Mary, Nole wasnt worried about protecting his credit score. it was already bad because he was behind on most of his credit card bills. Nole just wanted to get out of debt as quickly as possible for the least amount of money possible.
So, Nole worked with a professional debt settlement team. They negotiated with his creditors on his behalf and heres what happened:
- Nole paid just 55% of what he owed on each debt, on average
- He got out of debt for $18,548 total
- Whats more, he got out of debt in just 23 months, so he was debt-free in less than two years
Keep in mind that Nole did suffer some credit damage as a result of settling his debt. Each debt settled will be noted on Noles credit report for seven years from the date the account first became delinquent. But since Nole had missed payments and delinquencies already, this was something he was willing to deal with.
What To Look Out For
Unfortunately, finding the right professional to help with your debt management takes some time and effort.
“There are a lot of companies out there that claim they can help, but you want to be cautious about who you work with because there are many implications when resolving credit card debt,” Tayne says.
Not all debt resolution programs are valid, so it’s important to verify through the sources we listed above before moving forward.
When researching the best debt professionals to go to, your first clue is to make sure it’s a human on the other end of the phone associated with a real company address, not a PO Box. Check the company’s website beforehand to look for their contact information where a physical address would be listed and feel free to call them yourself and confirm.
Debt settler scams are all too common and something to watch out for as they like to solicit new customers.
“It’s easy to buy information about you and your debt, so it may look legitimate, but you’ll need to do your due diligence,” Tayne says. “Nothing should be full of pressure and nothing should have promises.”
It’s a red flag that the debt settler could be a scam if they make any outright promises or guarantees about how much money they can save you or how much time it will take to come to an agreement.
Essentially, if it seems too good to be true, it probably is.
“We don’t get paid until a client’s account is resolved,” Tayne says.
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Why Credit Card Companies Negotiate Debt
When finances get tight, credit card payments are often one of the first bills people let slide. After all, credit card debt is unsecured. If you dont pay your auto loan or your mortgage, your car or house could be at risk. The same isnt true with credit cards.
Thats not to say that falling behind on credit card payments isnt dangerous. When you pay any bill late, credit card bills included, you may damage your credit. Credit problems can haunt you for years. Plus, if you default on a credit card bill, theres a chance that the bank might sue you, and that leaves you vulnerable to more potential problems.
Credit card issuers are aware that your unsecured credit card debt may be at the bottom of your priority list if youre in a financial bind. When you fall behind on a credit card bill, the banks priorities may shift. Rather than risk you ignoring debt or filing for bankruptcy, a card issuer may be willing to consider negotiating credit card debt so that it gets back some of its money rather than nothing.
Offer A Lump Sum Settlement
If you have access to a good amount of cash, or can put it together fairly quickly, you can try to negotiate a settlement with the credit card company in three payments or less . Sometimes your credit card issuer will reduce your debt to the principal you owe. For example, lets say you have a credit limit of $9,000, but with interest, fees and penalties, your current balance is $12,000. You may be able to negotiate so that you pay just three installments of $3,000. The other $3,000 you owe will be forgiven.
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How To Negotiate When Times Are Good
If you’re not having trouble paying your debts and you have a good , you might want to contact your credit card companies to ask for a lower interest rate. While the answer could initially be no, if you tell them that you’re considering switching to a card with a lower rate, they might be willing to work with you.
Negotiating Credit Card Debt After Death
When an individual passes away and owes significant credit card death, their debt doesn’t automatically get written off . Usually, creditors can claim their estate and get paid out of any of the following assets:
- Bank accounts
- Insurance policies
- Anything that can be liquidated for money
What happens if your loved one doesn’t have enough estate value to cover their debt? The same applies if they had no assets either. However, they could pursue other family members for these owed accounts in certain situations. This often occurs if one is a loan co-signer or is their spouse residing in a community property state.
Keep in mind that if there are ample funds within the estate to cover the debt, the probate court will require it to be paid. While high amounts of credit card debt can have a devastating impact on an estate’s value, the court appoints a representative to verify and negotiate terms.
A seasoned attorney familiar with estate law and possessing sharp negotiation skills will prove invaluable during this phase of probate.
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Why Negotiate Credit Card Debt
If you find yourself in over your head with credit card debt, its a good idea to see what your issuer can do to ease your load. The ultimate goal of negotiating credit card debt almost always is to reduce monthly expenses, said Michael Sullivan, personal financial consultant at Take Charge America. Negotiating credit card debt, adds Sullivan, should be only done when necessary.
You may believe credit card companies are unwilling to negotiate with you. This is untrue. Turning to your issuer could result in a mutually beneficial solution for both of you.
One of the first things to remember is that credit card debt is unsecured debt, so it isnt like a car loan where the lender can recoup money when the debtor is in default by repossessing the car, said Steve Weisman, a Massachusetts-based attorney and professor. Therefore, a credit card company may be more willing to work with someone having financial difficulties, particularly if they are not as a result of excessive spending, but due to other circumstances affecting the credit card holders income.
Recognizing when you should consider negotiating your credit card debt is important. According to Laura Sterling, vice president of marketing at Georgias Own Credit Union, If you are unable to make your monthly credit card payments, either because your debt is too high or youve experienced a hardship, it may be time to consider negotiating your credit card debt.
Negotiating Credit Card Debt
If youre drowning financially and need help with credit card bills, you may wonder if its possible to negotiate your credit card debt. Options may include a partial settlement, a workout agreement, or even payment reduction for a few months.
There are key steps to negotiating credit card debt, but theyre not simple. Youll have to find a plan that works for you when trying to negotiate credit card debt. Options include a workout arrangement, forbearance, debt management plan and debt settlement.
Debt settlement program
With a debt settlement program, you negotiate a settlement for less than the full amount owed. The credit card debt negotiation depends on whether or not the individual creditor will work with you. And you need to understand that paying less than you owe impacts your credit score and some forgiven debt is viewed as income and may have tax consequences.
Debt management program
With a debt management program, a certified counselor negotiates credit card debt arrangements for you. Youll pay back your principal in-full, but your interest rates are reduced or even eliminated. Late fees and penalties may be waived. Youll only have one payment to make each month instead of several. Your credit score stays intact and may even improve while on the program. The key to a successful debt management program is that more money goes to eliminating the principal, while high interest rate charges end.
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