How to Effectively Negotiate With Your Credit Card Company

For millions of Americans, credit card debt is a painful reality. Unfortunately, the vast majority of these individuals are unaware of resources and methods available to them to help reduce their credit card debt.

One of the most powerful and effective methods of reducing your credit card debt is direct negotiation with your credit card company. This may sound somewhat intimidating at first, but actually it’s not as daunting as it might seem.

Obviously, there are some things you’ll need to know and understand before you engage in this endeavor. When preparing to enter debt negotiations with your credit card company there are some things that are important to consider up front.

Address one company at a time
First, you’ll need to know who you want to speak with when you call. Also, be aware that credit card companies, like most creditors, are concerned with your relationship with other creditors when they initially extend credit to you, but that will not be the case when it comes to negotiating your debt with them. Their only concern at this point will be recovering the money you owe them. Consider the big picture of your finances to ensure the terms that result from these negotiations will be what is best for your overall situation.

If you have more than one credit card, be sure to begin your negotiations with the card that has the highest interest rate.

Make a game plan
Next, have a specific idea of what you’re attempting to accomplish through this negotiation process. Being ambiguous with your goals will leave a great deal of room for an unproductive agreement.

Before you make initial contact with your credit card company, take the time to sit down and review your finances in depth. If possible, seek the help of a financial counselor to gain a clear-cut idea of what needs to be accomplished to ensure that you effectively reduce your debt. Your goal may be to lower your monthly payment, to get a forbearance, or to lower the total amount owed.

Lower your payments
Lowering your monthly payment can be achieved by lowering your interest rate, which will also allow you to pay off your debt with your credit card company sooner. In order to request a lower interest rate, you must be making at least the minimum payments on time each month. Be specific in what you’re requesting.

Lowering your interest rate has its advantages. It can, of course, lower your monthly payments or it can allow you to apply more of what you’re paying now toward your principal.

Forbearance
You may be going through a temporary financial situation for which you need short-term relief. In this instance, you can ask for a forbearance that would allow you to skip a certain number of payments. This will not help in reducing your debt, but it could offer you the temporary relief you seek. One of the greatest benefits of a forbearance, outside the immediate financial relief, is the fact that the missed payments will not count against you on your credit report.

Be sure that if you’re seeking a forbearance, you have a specific plan of what you’ll do with the money you’re saving. You want this action to have financial meaning.

Settlements
If you situation is dire, you may want to consider a debt settlement. Often, this is only available once you have missed several payments and have incurred late fees. In a settlement, you contact the creditor or the collection firm and offer to pay a cash lump sum in order to pay off all or a portion of your debt at a lessor amount than what is actually owed. A settlement will adversely impact your credit report because it will be reported negatively. Also, the portion of your debt that’s forgiven could be considered taxable income on your federal income taxes — which means you may have to pay taxes on it. Be sure that you know the terms you’re seeking beforehand.

Speak to the right person
Once you understand exactly what you want to accomplish through these negotiations, the next step is knowing who to speak to when you call. With the majority of credit card companies, the first person you’ll speak with will be a customer service representative. Very rarely will this person have the authority to deal with you on this level. You’ll need to ask to speak with a manager, supervisor, or anyone who has the authority to negotiate a valid deal with you. Some companies have entire departments dedicated to this, which can make the process flow much easier.

Once you speak with someone with the authority to enter into negotiations with you, make your expectation known up front. You don’t want to cloud the water with a lot of non-specific dialogue because it can easily cause you to lose your place and end up with something that is not what you were initially seeking.

Get it in writing
Finally, get it all in writing. Once you have reached an acceptable agreement with your credit card company, make sure all the terms are set out in writing, so that there are no misunderstandings or erroneous expectations.

If you follow these simple steps, you should place yourself is a good position to improve your credit card debt situation.

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