How to Effectively Negotiate With Your Credit Card Company

For millions of Americans, credit card debt is a painful reality. Unfortunately, the vast majority of these individuals unaware of resources and methods that are available to them to help them reduce their credit card debt.

One of the most powerful and effective methods of reducing your credit card debt is direct negotiation with your credit card company. This may sound somewhat intimidating at first, but actually, it is not as daunting as it may seem.

Obviously, there are some things that you will need to know and understand before you engage this endeavor. When preparing to enter debt negotiations with your credit card company there are some things that are important to consider up front.

Address one company at a time

First, you will need to know who you want to speak with when you call. Also, be aware that credit card companies, like most creditors, are concerned with your relationship with other creditors when they initially extend credit to you, but that will not be the case when it comes to negotiating your debt with them.

Their only concern at this point will be recovering the money that you owe them. You must be the one that considers the panoramic view of your finances to ensure that the terms that will be set forth as a result of these negotiations will be what is best for your overall situation.

If you have more than one credit card, be sure to begin your negotiations with the card that has the highest interest rate.

Make a game plan

Next, have a specific idea of what you are attempting to accomplish through this negotiation process. Being ambiguous with your goals will leave a great deal of room for an unproductive agreement.

So, before you make initial contact with your credit card company, take the time to sit down and review your finances in depth. If possible, seek the counsel of a financial counselor to gain a clear cut idea of what needs to be accomplished to ensure that you effectively reduce your debt with this company. Your goal may be to lower your monthly payment, to get a forbearance, or to lower the total amount owed.

Lower your payments

Lowering your monthly payment can be achieved by lowering your interest rate, which will also allow you to pay off your debt with your credit card company sooner. In order to request a lower interest rate you must be making at least the minimum payments on time each month. Be specific in what you are requesting.

Lowering your interest rate has its advantages. It can, of course, lower your monthly payments or it can allow you to apply more of what you are paying now towards your principal.

Forbearance

You may be going through a temporary financial situation in which you need to find temporary relief. In this instance, you can ask for a forbearance that would allow you to skip a certain number of payments. This will not help in reducing your debt, but it could offer you the temporary relief that you seek. One of the greatest benefits of a forbearance, outside of the immediate financial relief, is the fact that the missed payments will not count against you on your credit report.

Be sure that if you are seeking a forbearance that you have a specific plan of what you will do with the money that you are saving. You want this action to have financial meaning.

Settlements

If you situation is dire, you may want to consider a debt settlement. Often, this is only available once you have missed several payments and have incurred late fees. This is where you contact the creditor or the collection firm and offer to pay a cash lump sum in order to pay off all or a portion of your debt at a lessor amount than what is actually owed. A settlement will adversely impact your credit report because it will be reported negatively. Also, the portion of your debt that’s forgiven could be considered taxable income on your federal income taxes — which means you may have to pay taxes on it. Be sure that you know the terms you are seeking beforehand.

Speak to the right person

Once you understand exactly what you want to accomplish through these negotiations, the next step is knowing who to speak to when you call. With the majority of credit card companies, the first person that you will speak with will be a customer service representative. Very rarely will this person have the authority to deal with you on this level. You will need to ask to speak with a manager, supervisor and anyone that has the authority to negotiate a valid deal with you. Some companies have entire departments dedicated to this, which can make the process flow much easier.

Once you speak with someone that has the authority to enter into negotiations with you, make your expectation known up front. You don’t want to cloud the water with a lot of non-specific dialogue because it can easily cause you to lose your place and end up with something that is not what you were initially seeking.

Get it in writing

Finally, you want to get it all in writing. Once you have reached an acceptable agreement with your credit card company, make sure that all of the terms are set out in writing, so that there are no misunderstandings or erroneous expectations.

If you follow these simple steps you should place yourself is a good position to improve your credit card debt situation.

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