The average American household has nearly $10,000 in credit card
debt, 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 pay it off. Since new legislation will make it more
difficult to file for bankruptcy, it may occur to savvy debtors
to try to negotiate 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; 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. 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. They're often willing to do this instead of
turning your debt over to a collection agency, as it's cheaper
just 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,
though. 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. Additionally, the amount of your debt
that gets written off will show up on your credit report as bad
debt, and that will stay there for seven years.
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 consolidation firm. If your credit
card debt is substantial and you just can't make the payments,
it's worth a try.
