If you have found yourself with a significant amount of credit card debt and rising interest rates, it may benefit you to try to negotiate with your credit card company to lower your rate or reduce your debt in some other manner. This article will offer seven tips to negotiating with your credit card company.
Are the interest rates on your credit cards higher than you can afford? Use our free online credit card finder to search for cards with lower interest rates.
It may take some perseverance though in order to get the company to agree to negotiate. You also need to be aware of the credit rating problems you may face depending on the settlement you agree to with your credit card company.
Why and when is it a good idea to attempt to negotiate with your credit card company?
According to SmartMoney, the average household carries over $14,000 in credit card debt. Most companies will significantly raise your interest rate even if you miss only one payment. Even if you pay your minimum balance on time each month it will take many years to pay off credit card debt due to the rate at which you will accumulate interest.
Negotiating with credit card companies can take some time and effort, but in the long run, you may be able to lower your interest rate enough to pay off your debt sooner or reduce your debt through other means such as a Workout Arrangement. Below are seven tips that will help you when you are ready to begin negotiating and take control of your credit card debt.
First, you need to determine how much negotiating you need to do in order to get your rate down to one you can afford. By visiting online sites such as Suze Orman’s, you can use an online tool to calculate the exact amount you can afford to pay each month. Keep in mind you should aim to pay more than the minimum credit card payment. Knowing how much you can afford to pay towards your credit card debt each month will help you decide what type of agreement you want to try to convince your credit card company to agree to.
After you know what you can afford to pay each month, you need to decide what agreement you want to attempt to negotiate. The most common type of negotiation involves lowering your interest rate. Other options include:
- Lump Sum Settlement – You agree to pay less than the amount owed but in one lump sum. This will negatively affect your credit score and be viewed as a charge off. In addition, if you are forgiven more than $600, you are required by law to pay income taxes on the amount you are forgiven.
- Workout Arrangement – This may be a rate reduction agreement or may include forgiveness of late fees or over limit charges. It could be a temporary reduction in your monthly payment or a permanent reduction. This agreement may or may not affect your credit rating.
- Debt Management Program – Your credit card company may recommend you join a credit counseling program in which a credit counselor arranges agreements with all of the companies you owe money to in order to consolidate your debt and attempt to lower your rates and help you pay off that debt. Your credit card accounts will most likely be closed which will affect your credit rating.
- Forbearance Program – Your credit card company agrees to give you a brief break from your payments until you are able to get back on your feet.
It will benefit you to collect some credit card offers before you call your credit card company. These frequently come in the mail, but you can also easily get interest rate quotes and offers online. Some cards will not only offer a much lower interest rate than you currently have, but may also offer several rewards such as cash back or airline miles. If you can make your credit card company believe that you have better offers, you can and will accept they may be more likely to negotiate.
You should make a list of all credit cards you currently carry a balance on. Then look at your interest rates and begin by calling the company with the highest interest rate first. It may take you some time to negotiate with each company, and you want to tackle your highest rate card first.
When you call your credit card company, make sure to ask to speak to a supervisor. Most customer service representatives are not allowed to negotiate with customers. You need to speak to a supervisor or manager in order to have a chance to negotiate. Make sure you write down the name and extension number of the person you speak with. It may take several phone calls to get the results you desire.
If your credit card company does not offer you a reasonable rate or balance reduction, do not be fearful of leaving your company and transferring your balance to a card with a lower interest rate. You can then call to cancel your original card. Be warned though. Closing credit cards does lower your credit score.
When you call to cancel your account, your credit card company may offer you an even better deal than what you received when you switched cards. It may be very tempting to switch back. You need to weigh the pros and cons. Canceling cards and opening new ones frequently will hurt your credit rating. Still if you are offered an interest rate that is several points lower than the offer you accepted, you might want to consider sticking with your original company.
What do I do now?
- How can I negotiate credit card debt?
- How should I deal with credit card companies raising rates?
- Should I seek help before negotiating with credit card companies?
- What are some good strategies for paying off credit cards quicker?
- How to get credit card companies to reduce balances?
- Can I get a credit card rate reduction?
- How do I negotiate with credit card companies?