The average American household has nearly $10,000 in credit card debt on six accounts, and many people are only able to make the minimum payment of 2% of the balance. Even 2% is $200, and by paying the minimum payment, you could be paying on the balance for decades before you finally become debt free.
New legislation from the OCC and Federal Reserve will make it more difficult to file for bankruptcy and maintain minimum payments. It may be advisable for debtors to attempt negotiating a better deal with their credit card company in order to make it easier to pay off
the balance. Is this possible?
It might be possible, depending on your credit history, interest rate, and current balance.
Your best bet, especially if you have a history of paying on time, is to simply call your credit card company and ask if they will lower your interest rate. They might, especially if you tell them that you got a better offer from another bank. If you have a history of paying late, however, they probably will not be willing to lower your interest rate. That’s unfortunate, since paying late has probably prompted the credit card company to raise your interest rate in the first place. Still, it’s worth a phone call as you may get lucky.
If you’ve been paying your bills on time, asking for a lower interest rate may be the only option available to you. The credit card companies aren’t going to be too sympathetic to your financial woes if they’re receiving payment on time. On the other hand, if you’re late on your payments, especially if you’re more than three months behind, you may have some negotiating leverage as creditors fear you may run off to bankruptcy.
That leverage comes with a few strings attached, however. You may be able to negotiate a lump-sum settlement for your outstanding balance, where the credit card company accepts a portion of your debt and writes off the rest.. Creditors are often willing to do this instead of turning your debt over to a collection agency, as it’s cheaper to settle. The settlement amount will vary, depending on your interest rate, your balance and your payment history. This type of settlement comes with a couple of problems of its own. The issue is most consumers who need to settle their debts don’t have lump sums of money available. What if you don’t have the money to settle all at once? If you can’t pay your bills on time, you probably don’t have the cash to settle at once.
Your credit card company may or may not be willing to work out a payment plan, but it costs you nothing to ask them, and negotiating a settlement with them may be cheaper for you than if you consult with a debt consumer credit counseling company. If your credit card debt is substantial and you just can’t make the payments, it may be worth contacting a
debt settlement company to structure a program to eliminate your credit card debts. Third party settlement companies have leverage with creditors because they work directly with them each and every day. There are things a creditor can tell and do to you that they can’t do to a settlement company. Settlement companies can’t get pushed around by creditors because they know the rules and regulations.
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