Credit Card Debt

How to Negotiate Your Credit Card Debt

When someone owes a large amount of money on credit cards, the possibility of ever paying down that balance can seem impossible. Simply making the minimum monthly payments can be a struggle, as well, especially during the current pandemic. However, credit card companies would rather work with the consumer directly in lieu of the account going into default, forcing them to pursue a collection on the amount owed. It is possible to negotiate directly with the credit card company on the amount owed in certain circumstances.  

During the coronavirus (COVID-19) crisis, certain credit card companies are working with consumers who are behind on payment. This assistance is temporary in nature but can include pausing payments, reducing interest rates, waving late fees, and putting a pause on interest charges.  

If a consumer is struggling to pay his or her credit card debt, it is important that the cardholder contact the creditor directly. The biggest mistake a consumer can make is to ignore the debt or just not make the monthly payment. Not only will this put the card into default, but the card’s interest rate will likely spike, and the consumer’s credit score will immediately take a hit. Before reaching that point, the consumer should at least reach out to the credit card company, explain his or her situation, and see what can be done.  

The credit card company will likely want some background information before deciding, including the person’s current income and expenses, the current balance, the individual’s credit history, and what his or her financial goals may be. Have this information ready and easily accessible before making that initial call with the credit card company 

If the consumer is not comfortable doing this negotiation directly, he or she could work with a credit counselor or even a debt settlement company. However, extreme caution should be used when agreeing to work with anyone claiming they will negotiate your debt. Countless debt settlement scams exist where companies seek to only take the customer’s money and do little to nothing in terms of helping with debt settlement.  

Given the nature of today’s economic climate and the COVID-19 crisis, credit card companies have been more lenient about clients not being able to make payments. However, before agreeing to any debt settlement, be sure that the amount that is agreed upon is feasible and realistic for the consumer. Do not agree to an amount that cannot be paid or maintained over time.  

Many experts recommend that consumers start the negotiations with lowering the card’s interest rate. Credit cards notoriously have higher interest rates than most other forms of debt, which is why they can be so difficult to pay down. By lowering the interest rate, the monthly payment will also likely go down, which can make paying the card easier.  

If the card has incurred late fees due to missed payments, the consumer can also seek to have these late fees waived.   Many times, credit card companies are also willing to adjust the payment schedule. If the individual can make payments towards the end of the month rather than mid-month, he or she can seek to have the due date moved for that card.  

If the cardholder has room in his or her budget to make one large payment to pay off the card in full, many credit card companies will work with the cardholder on a lump-sum settlement, which would eliminate the card as an outstanding debt completely. However, this method has its downsides. The cardholder will need to report the amount that was forgiven in his or her tax return for that year, and his or her credit score can take a hit depending on how this settlement payment is reported to credit bureaus. 

If the cardholder is simply going through a temporary hard time due to the current crisis or any other emergency, ask to have a hardship plan put in place. Hardships are different from forgiveness since they are temporary in nature, much like a forbearance of the debt. The consumer will still owe what is outstanding, but he or she will get a temporary reprieve from making payments. 

Before deciding what type of settlement to seek, the consumer should carefully examine his or her financial situation. Choose the options he or she is willing to accept and try going in with a script so that the conversation flows. Have the card information present, including the account number and amount owed, before contacting the credit card company. If an agreement is reached, make sure that the consumer gets it in writing before making any payment. Lastly, be patient. The process may not be immediate, and it may require some homework on the cardholder’s part. However, it is possible to receive relief in terms of credit card debt through these types of negotiations.  

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at   

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