How To Negotiate With Credit Card Companies In 5 Steps
If you plan to negotiate with your credit card company on your own, follow the five steps below to get the best results.
1. Find out how much you owe
Before you do anything else, find out what your outstanding balance is by calling your bank directly or by checking your account online. Its also worth checking the interest rate on your debt. Youll need to have these numbers on hand when you negotiate.
2. Consider your options
You need to decide whether you want to negotiate a debt settlement, a workout agreement, or a hardship program.
Think about what you needif its just temporary relief while you get back on your feet, a hardship program or workout agreement might be sufficient. On the other hand, if you have no realistic prospect of paying your debt at all, you should ask for a debt settlement.
3. Call your credit card company
Once youve gathered all of the information you need, its time to call your card issuer. Make sure youre speaking to someone who has the power to approve your request, like a representative from the debt relief or hardship department.
4. Be persistent
Its unlikely that your lender will accept your first offer, so be prepared to make more than one. As mentioned, if youre asking for a debt settlement, 50% of your original debt is a reasonable goal to shoot for.
5. Request an agreement in writing
Understand How Debt Collectors Work
Debt collections can happen to even the most financially responsible consumers. A bill may slip your mind, you may have a dispute with the creditor over how much you really owe, or billing statements can get lost in the mail before you ever know the debt exists. Occasionally, debt collectors fabricate bonus debts and attempt to scare consumers into paying them.
No matter how much you may want to ignore the collection, taking care of collection accounts is usually better for you and your credit score in the long run. Once you pay, you’ll stop the collection calls and letters for good, improve your credit history, and eliminate the risk of being sued for the debt.
As with any negotiation, knowing as much as you can about the other party puts you in a better position to get what you want out of the deal. The debt collector’s goal is to make as much money as possible from collecting the debt and they do this in two ways. Debt collectors can add fees on the debt as allowed by state law. Or, junk debt buyers earn profits on debts they’ve purchased for just pennies on the dollar.
Collectors only make money when consumers pay the debt. They can’t seize property or take money from consumer bank accounts unless they sue and obtain a court judgment and permission to garnish the consumer’s wages.
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.
Don’t Miss: Elan Financial Fargo Nd
What Is Debt Settlement
Debt settlement refers to resolving debt by paying less than you owe. You can negotiate with creditors on your own, and there are also companies that settle with creditors on your behalf. Working with a debt settlement requires stopping payments on your debt and sending money to the settlement company instead. This will significantly lower your credit score until the settlement company starts settling your debt. Interest and fees also accumulate while the company settles the debt. Debt settlement companies also charge fees.
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.
Don’t Miss: Www Lowesvisacredit Com
Diy Vs Hiring A Professional: Pros And Cons
If you do the work yourself, obviously youll save money by not having to pay someone to do this for you. Here are a few things to consider when trying to decide whether to take the do-it-yourself approach to the debt settlement process versus hiring a professional:
If you need credit card debt relief, but attempting debt settlement on your own seems overwhelming, let’s talk to see if we can help you.
Get All Agreements In Writing
Whether youre negotiating directly with a creditor, or dealing with a collection agency, get any agreement in writing. Youve gone to the great effort of keeping notes and tracking conversations. The final step is to formally document the agreement.
Failure to do so could expose you to getting tracked down about the same debt at a later date. After the sometimes challenging and labor-heavy negotiations to settle what you owe, the last thing you want is to have to go through the process again because you dont have a written record of the agreement.
Read Also: Home Depot Credit Card Annual Fee
Be Familiar With Your States Laws
If the debt collector attempts to charge you fees or interest, check your state usury laws. These laws put limits on how much interest a creditor may charge.
Make sure the debt collector is in line with state law. Otherwise, its time to let them know that youre aware of your rights and that the agency is violating them.
Why Would My Credit Card Negotiate With Me
Like I said, Ive been there. I know how it feels. Every time you pay on your credit card balance, you dont see any results on the bottom line.
At this point, the credit card company is simply taking your money and not even reducing your balance in any meaningful way. Why would it want to help you put an end to that set-up?
Well, yes, it is a credit card companys goal to make money by lending you money at interest and then enforcing its rules about late fees, over-balance fees, and punitive interest rates.
But that doesnt mean the company benefits from your out-of-control account, especially if you give up on paying it off.
Lets take a look at it from the credit cards point of view:
- If you give up, the company spends a lot of time and money trying to collect your balance, then finally sells off your debt for pennies on the dollar.
- If you give up, the company loses the ability to lend you money since you no longer qualify for loans, meaning theyve lost a customer.
- Not only has your credit card lost your business, but the entire legitimate credit industry has lost you as a customer because your credit score prevents you from borrowing except in rare situations.
But working with your creditors is not an exact science. You cant just call the customer service line and set your terms.
Youve got to know what to ask and how to ask it. You need to know who has the authority to help you. You need to know how much you can afford to pay if you reach a settlement.
Read Also: Citibank Best Buy Bill Pay
The Truth About Credit Card Debt
You could negotiate a better solution with your credit card companies.
Weve reached the point where you might expect to hear something reassuring, right? This is where I should say, Yes, you can get out of debt. Things arent as bad as they seem. You just need to keep trying.
Well, there is some truth in that, but Id rather just be straight with you:
If youre in deep with one or more credit cards and youre starting to feel like its hopeless, you can still get out of the hole.
But its going to take more than patience. Its going to take a lot of persistence, some self-discipline, and some serious strategizing.
A good starting point for any strategy will be to ask your credit card issuer for help, and thats what this post is about.
Settling Credit Card Debt
If you’ve maxed out your credit cards and are getting deeper in debt, chances are you’re feeling overwhelmed. How are you ever going to pay down the debt? Now imagine hearing about a company that promises to reduce or even erase your debt for pennies on the dollar. Sounds like the answer to your problems, right?
The Federal Trade Commission , the nation’s consumer protection agency, says slow down, and consider how you can get out of the red without spending a whole lot of green.
Recommended Reading: How To Activate Cabelas Credit Card
Before You Try To Negotiate A Debt Settlement On Your Own
Before arranging a debt settlement, you should consult an expert to learn what your best options are. Learn about your choices and the best course of action to eliminate debt. There is no obligation to move forward. Sometimes, our clients qualify for plans that do not hurt their credit scores.
For a free consultation to see if your best option, fill out the debt relief form on this page.
Check To See If Any Of Your Debt Is Zombie Debt
According to Forbes, zombie debt is years old, and is entirely owned by a debt collection agency. Many times this zombie debt is past the statute of limitations, and you may not be held legally responsible for it.
One way to find out whether you’re past the statute of limitations is to request a Debt Verification letter from your creditor. You can ask for one over the phone or by fax. If you want to request a debt verification letter by fax, here is a template you can use for that.
If you don’t know what the statute of limitations is for zombie credit card debt in your state, you can go here to find out the details.
Don’t Miss: Apply For Best Buy Visa Card
Benefits Of Diy Debt Settlement
- Pay off credit card debt faster: You can put your credit card debt behind you and work towards rebuilding your credit and overall financial health by settling your credit card debt.
- Save a bundle in interest: Negotiating a settlement means you wont continue making minimum payments and racking up a ton of interest.
- Avoid additional fees: Many debt settlement companies assess a fee between 15 and 25 of the settled amount, but you can avoid this added cost by negotiating with credit card companies on your own.
Why Credit Credit Card Companies Negotiate
It’s ALL about loss mitigation.
Whether we’re in a good economy or not, a certain percentage of credit card accounts are delinquent. For credit card companies, it’s just the cost of doing business and they know it.
Each credit card company has their own policies and procedures, but at the end of the day they’re simply trying to maximize recovery and minimize loss on delinquent accounts.
Remember, credit card debt is unsecured debt. If a credit card account becomes delinquent there’s no property to repossess or put a lien on.
Therefore, when an account becomes delinquent, credit card companies have to decide whether it’s worth pursuing the outstanding debt or just cutting their losses and moving on.
As the saying goes, businesses don’t want to “throw good money after bad”.
Also Check: Chase Close Credit Card Account
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.
Be Willing To Go The Long Haul
Chances are you wont solve your problems in one phone call or even two or three phone calls. But you can save time by knowing this up front and being willing to call back and continue the discussion.
Once youve reached a credit manager or someone else with the authority to make changes to your account, get that persons name and direct contact information.
That way you can get back in touch with them directly after youve had a chance to think about the solutions youve discussed.
If you dont get immediate results, try again the next day and the next week. Too many people open negotiations and then never follow up because they didnt like the managers first offer.
Don’t Miss: Citi Best Buy Credit Card Pre Qualify
How Negotiating Credit Card Settlement Typically Work
You can possibly avoid further damage to your credit profile and get back on track by negotiating your credit card debt. This arrangement allows you to pay the credit card company a fraction of what you owe to settle your account.
Its possible to handle negotiations independently, but working with a debt settlement company could yield better results. More on that shortly.
Alternatives To Credit Card Debt Settlement
Debt settlement is the right choice for some people, but keep in mind that it will lower your credit score and make it harder to borrow money in the future. Even if you do qualify for future credit, your interest rates will be much higher than they would be if you had an excellent credit score. If youd like to avoid debt settlement, you do have other options.
Also Check: Synchrony Shopping Cart Trick
Your Credit Card Debt Questions Answered
Your credit utilization ratio measures the amount of credit youre using compared to your cards credit limit. If you dont carry a balance, your credit utilization is 0. A high utilization rate may indicate youll have a hard time paying your credit card balance on time, so a lower utilization rate is better for your credit score. You should aim to have a credit utilization ratio of 30% or less. Anything higher can damage your credit score. Not using your card enough can also affect your credit score because lenders wont be able to measure your creditworthiness.
Make A Realistic Plan You Can Follow
Fixing your debt issue will require some sacrifice, but dont sacrifice too much.
If youre thinking about getting your financial life on track by eating out less and going to the movies only twice a month instead of four times a month, thats great.
If youre looking to cut your Amazon spending in half, thats good, too.
However, dont go overboard by making sacrifices you cant continue. That will set yourself up for failure. Chances are youre going to have to eat out at some point during the month, so saying I wont eat out so I can pay off my credit card may not be the best plan.
In other words, dont paint yourself into a corner in an attempt to get out of debt. Be reasonable and make decisions that you can sustain.
Knowing how much you can realistically afford to spend on debt reduction will help in your negotiations.
Recommended Reading: Lock Chase Credit Card
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: