Can You Negotiate Settlement On Credit Card Debt?
Wednesday, June 10th, 2009 Subscribe To Our Feed
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 good proposal 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. If you have a history of paying on time, then you can easily get lower interest rates by calling your company. They will, if you tell them that you got a better offer from another company. If you pay your debt late, then probably your company will not be willing to lower your interest rate. May be credit company has raised your interest rate because of your late paying habit. You can give a try, may be you are lucky.
If you’ve been paying your bills on time, asking for a lower interest rate may be the only option available to you. If credit card companies are receiving payment on time then they aren’t going to be too compassionate to your financial woes. 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 bargain 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. Though, this type of negotiation comes with a couple of problems of its own. What if you can not pay the settlement amount at once? If you are late in payments the probably you do not 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 big and you just can not make the payments, it is worth a try.
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