Are you swamped with unmanageable credit card debt? You are finding that fees and interest accumulate faster than you can keep up. The possibility of bankruptcy looms in your future if something does not change. You may be able to negotiate settlements with your credit card providers to pay off your debt for less than your balances currently reflect.
Credit card companies do not want you to pay off your debt.
Do not expect asking for concessions from your credit card company to be an easy task. From the card issuer’s perspective, they are losing future interest and potentially writing off past fees, interest, and part of the outstanding principal balance. These companies view this as a bad thing. This means that you are swimming upstream from the beginning of negotiations.
Plan to make multiple calls until you are successful.
Who you talk to makes a difference. Supervisors and managers tend to have more clout to get things done. Lower level customer service workers use scripts and are usually reluctant to send callers up the ladder. It is assumed that they worry about being perceived as unable to do their job if they have to involve a supervisor. Call again and again over a period of a week or two. You increase the odds of getting a supervisor to answer the call or a customer service person who is willing to get a supervisor involved.
You need to get some type of leverage.
This leverage can be painful for you and your credit score. Unfortunately, if you have reached this point, your credit score may already be plummeting. A few debt settlements may actually improve it in the long run. To get leverage on a credit card company requires thick skin and some risk.
The credit card has to believe that you are going into serious default on the loan.
If you have extremely high balances above $10,000 per card, you may want to get some legal help to try this. Smaller loan amounts will not give card companies much incentive to sue for the balance. Large balances make for a shorter fuse on litigation.
Some lawyers offer this type of negotiating services for a fee.
If you miss three or four consecutive payments, you will build leverage for your case that you need to settle. Even if you cannot settle, you may be able to negotiate more favorable interest and payment levels for several months to help you get your finances back in order. The collectors will be harassing you, but hang on. It takes them a while to decide to try for a judgment to get a garnishment.
Have cash available to pay off the debt.
Once the credit card company starts to sing a better tune, you are in a position to ask for a settlement. The idea is that they would like to get something the easy way than risk getting nothing through expensive litigation. Save up cash while you are not paying the bill. Raise as much money as possible. When the card company offers a settlement, you have some negotiating room but not a great deal.
For example, you may owe them $1,500 in principal, interest, and service charges.
They will offer to waive most of the fees and interest for the past several months. It is possible that after those are removed the offer will be to settle for $750. You may get them down another $50 or so. Mostly, it is better to not press too hard and risk losing the settlement offer if the offer is fair. You will need to make immediate arrangements to pay this amount in full or in two or three large payments.
How much do you owe?
Size matters in debt negotiations. Since the credit card companies have more to lose, they can choose to work harder to get it. Plus, it is much harder to raise $5,000 to pay off a settlement quickly than it is to raise $750. In this case, you may have to negotiate a level payment with a reduced interest rate until the balance is paid. The only downside to this approach is that the card company will not be as flexible if you do not live up to the agreement.
Do you need to pay off this debt to survive financially?
Is paying off this debt a necessity or just an attempt to bail out of an obligation to pay? Good collectors can often smell the difference between someone who is in financial trouble and someone who is a deadbeat. Your efforts to negotiate will have a much higher chance of success if your financial future depends on getting rid of this debt.
Have a plan, but be flexible.
Some people have trouble knowing when negotiations are finished. If you have been made a reasonable, livable, and fair offer, it is time to shake hands on it and move on. Be willing to explore every option offered by the credit card company.
Most of the time, you can make arrangements to have a day or so to consider the offers before you have to choose. Get the phone number and information needed to get back in touch with the same person that you are speaking with during the negotiating process. This is important if you have to think about what direction to go.
Keep good records.
Make sure that you have names, dates, and phone extensions of everyone that you speak with during the process. Keep these as a part of your permanent files on this debt. If you get calls in the future from the collectors, you will need this information to protect yourself. The same is true if the credit card company reneges on the deal and takes you to court.