Editorial Policy

Struggling with Credit Card Debt? How to Negotiate with Credit Card Companies

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By Eva Norlyk Smith, Ph.D.
May 22, 2009

There are some things in life that get better with age. Unfortunately, credit card debt is not one of them. The longer you wait before dealing with credit card debt, the more it will grow, and eat away at your long-term financial health.

The first step to dealing with credit card debt is to look into ways to consolidate your credit card debt by doing a balance transfer to a low interest credit card. However, if you are knee-deep in debt, this usually won’t be enough. If you are in danger of defaulting on your debt, try to negotiate with your credit card company to get your interest rate and monthly payments lowered to a level you can afford.

If at all possible, negotiate before you fall behind in payments. If you call your card issuer before you are late with payments, you will not only save your credit score, you may be able to get your interest rate and monthly payments lowered to a level you can afford. If you are more than 30 days past due, your account will eventually be turned over to the collections department, and the rules of the game change.

Credit card companies get lots of calls from people who can’t pay their monthly bills, so the challenge is to convince them that you’re not just a deadbeat trying to get out of paying your debt. The more you can show them that you’ve landed in this situation due to no fault of your own, the better your chances. Here are 6 steps to follow for best results:

  1. Before approaching your card issuer, find out how much you can afford to pay on your credit card each month. It must be as high as you can afford, but it must also be sustainable, so that you can continue to live up to your side of the agreement
  2. When you call your lender, explain the reasons you’re behind on your payments. Give them a few details of why your financial situation has worsened. If your financial hardship is due to life events beyond your control, explain these, but stay brief and to the point.
  3. Let them know how much you can afford to pay each month, and explain that you really want to be able to pay the debt down. Keep reiterating that you want to hold up your side of the bargain, but that you need them to change the terms to make it affordable to you. Make it clear that they can avoid losing money, if they work with you.
  4. Be polite and persistent. There is a great difference between customer reps, so if one person is unwilling to help you, don’t take it personally. Simply call back later. In most cases, you’ll need to ask to talk to a manager. If the first manager you talk to isn’t willing to help, wait eight hours for the next shift before calling back.
  5. The changes to the terms of your credit card debt should include both lower monthly payments and a much lower interest rate, so that you won’t be paying off your debt forever. If they offer you a lower interest rate, but it’s still above 10%, explain that you’re trying to get out of debt fast and ask if it’s possible to go any lower.
  6. Get it in writing. If the lender agrees, you will be placed on a repayment plan that should include changes to your current account terms. Ask for a written document detailing the terms of the program so there’s no room for misunderstanding. And don’t miss a payment date.

If your card issuer tries to refer you to a non-profit credit counseling agency instead, say thanks, but no thanks. Most card companies have “non-profit” credit counseling agencies they work with. That produces a conflict of interest, which means that their idea of good terms will likely be bad terms for you. Instead, politely explain that you’re the one they should be dealing with if they want to get the debt settled.

Alternatively, consider consulting an attorney for advice. An attorney familiar with your financial situation may have greater success calling your card company on your behalf. If you can’t afford to hire an attorney, try to find one who is willing to work pro bono or for a small fixed fee.