Editorial Policy

How to get what you want from your credit issuer

Nick DiUlio

August 15, 2013

Whether you're inquiring about something simple — such as waiving a first-time late fee — or something as complex as a debt settlement plan, negotiating with your card issuer can be a difficult dance to choreograph.

“The good news is that almost everything is up for grabs,” says Scott Bilker, author of “Talk Your Way Out of Credit Card Debt” and creator of DebtSmart.com. “Some things are going to be easier to negotiate than others, but really, all things are possible in the world of credit negotiations.”

If you're considering making a call to your credit card company, these tips will help you negotiate your way to success.

Leverage is everything
According to Mike Sullivan, chief education officer of Take Charge America, a national nonprofit credit counseling and debt management agency, your negotiating power depends heavily on your credit history and the options you have to switch to a different lender.

“If you have poor credit and few options, you don't really come to the table with much leverage,” Sullivan says. “But if you have excellent credit and a lot of options, you're going to have more power to get what you want.”

Sullivan encourages consumers to remember that credit card issuers are  interested in making smart business decisions. That means they will be willing to make concessions only if they know you've been a reliable customer and could always switch to a different company.

“The credit card company doesn't care about the personal problems you might be having, so emotional pleas aren't going to get you very far,” Sullivan says. “What you need to do is make a business proposition that makes sense to them.”

It costs about $300 for a credit card company to obtain one new customer, according to Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies — and this usually works in a consumer's favor.

“If a consumer has a very good credit score and has been with that company for several years, they might be able to get quite a few concessions from their credit provider,” Jones says. “The company doesn't want to lose you as a customer, because finding a new one to replace you isn't cheap.”

Just make sure you are ready to follow through if your request isn't met.

“You can't fake it,” Bilker says. “It's like the guy who says he'll quit if he doesn't get a raise. If you can't follow through, don't start the conversation.”

Things you can negotiate
If you've got the credit history and the mettle to start bargaining, here are four things that are up for negotiation when it comes to credit.

1. Late fees
Most late payment fees will be less than $25, according to Bilker, and asking your credit card company to waive one of these penalties is an easy concession to negotiate.

“If it's the first time you've ever asked, that's probably going to be a quick call,” says Bilker. “They don't want to lose you as a customer over one stupid late fee.”

Before making that call, however, Bilker says it's important to come armed with a sense of your history with the company.

“You want to be able to say, 'Look, I've been a solid customer for this many years. I've spent x-number of dollars on this card. And I've never missed a payment. Can you help me out this one time?' They won't even blink,” Bilker says. “If it's your third or fourth late fee, however, you're going to run into resistance.”

2. A better interest rate
This is one of the most commonly negotiated points between credit card providers and consumers, Sullivan says. What's more, getting a lower annual percentage rate is often easier than most people realize.

Before you call your credit card company, however, Sullivan suggests exploring alternatives. Find out if there are comparable cards out there with lower interest rates. Then call your current credit provider and tell them you're thinking about making a switch.

“If you suddenly notice your interest rate spiked from 18 percent to 22 percent, and you also know there's a card out there offering 15 percent, you have an excellent chance of getting your rate lowered,” Sullivan says. “They won't necessarily give you the exact rate you want, but they will give you what they can afford to keep you as a customer.”

It's critical, says Jones, to properly phrase the request. That means consumers should never come to the table asking for a lower interest rate because they are unable to pay the current one.

“If you plead an inability to pay, that's going to scare the credit card company right away,” Jones says. “And don't whine or get belligerent, thinking the company owes you something. This is a voluntary situation for the card company and they are only interested in making a good business decision.”

3. Credit limit
Extending one's credit limit isn't just a matter of wanting to buy more stuff. In fact, as personal finance blogger Jason Bushey points out, asking for more credit can be a great way to help maintain a good credit score — especially if you regularly carry a balance.

The ratio of the amount of credit you're using to the amount available is called the credit utilization ratio, and keeping it low is important to maintaining a positive credit score. Adding available credit and paying down existing debt are simple ways to keep this balance where it ought to be (at no more than 30 percent).

“Credit lines are often extended automatically, but it's just as simple for a customer to call his or her credit card company and ask for an extension,” Bushey says. “Worst-case scenario, they say no. There's really nothing to lose.”

Even if your issuer denies a credit limit increase, there are still some other options, says Edgar Dworsky, former Massachusetts assistant attorney general in consumer protection and founder of ConsumerWorld.org. For instance, if you have more than one card with the same company, it's possible to move credit from one card to another.

“Don't try to force it or get angry if you're denied an increase,” Dworsky says. “Just ask them if there are any other ways they might be able to help you out.”

4. A debt settlement
If you suddenly find yourself unable to pay the remaining balance on your card, you may want to ask your issuer to decrease the principal. But that, says Dworsky, is an incredibly difficult concession for any company to make.

“If you owe the credit card company $10,000, why would they say it's OK to only settle for $5,000? You bought $10,000 worth of stuff. Sorry you had some difficulties in your life, but you need to pay,” Dworsky says.

That being said, negotiating a debt settlement isn't impossible. According to Bilker, credit card companies may be willing to budge if they know you are at the end of your financial rope.

“Start off by telling them you'll pay half the balance right away, and that's all. You may go back and forth a few times, but you might come to terms in the end,” Bilker says. “If they refuse to settle, you can always tell them you're going to file for bankruptcy, which means they'll get nothing. Suddenly 50 percent today may look a lot better than nothing at all.”

What's more, Sullivan says it's important to come to the table with a believable — and honest — story.

“If you call up and tell them you lost your job, your husband is in the hospital, and there's virtually no income right now, they may be willing to accept an offer,” Sullivan says. “The trick is to convince them that there's no way to collect the principal you owe. That you're talking about water from a stone. It's not emotional, it's business.”

Just remember that if the issuer does accept a settlement, you will most likely receive a 1099-C form in which you'll have to declare the forgiven amount as income on your next tax return.