How To Cut Your Credit Card Debt
Thursday, May 28th, 2009 Subscribe To Our Feed
The average American household has nearly $10,000 in credit card debt, and many people are only able to make the minimum payment of 2% of the balance. If you just pay the minimum payment, then it will take you decade to pay the total amount. Since new legislation will make it more difficult to file for bankruptcy, it may occur to savvy debtors to try to negotiate a better offer with their credit card company in order to make it easier to pay off the balance. Is this possible?
It might be possible, depending on your credit history, interest rate, and current balance. If you have a history of paying on time, then you can easily get lower interest rates by calling your company. They will, if you tell them that you got a better offer from another company. If you have a history of paying late, however, they probably will not be willing to lower your interest rate. May be credit company has raised your interest rate because of your late paying habit. Still you can try may be you are lucky.
If you’ve been paying your bills on time, asking for a lower interest rate may be the only option available to you. The credit card companies are not going to be too concerned to your financial woes if they’re receiving payment on time. On the other hand, if you’re late on your payments, especially if you’re more than three months behind, you may have some negotiating leverage. However, that leverage comes with a few strings attached. You may be able to bargain a lump-sum settlement for your outstanding balance, where the credit card company accepts a portion of your debt and writes off the rest. They’re often willing to do this instead of turning your debt over to a collection agency, as it’s cheaper just to settle. The negotiation amount will depend on your balance, your interest rate and your payment history. Though, this type of negotiation comes with a couple of problems of its own. If you did not have the money to settle at once then what are you going to do? If you can’t pay your bills on time, then how will you pay the lumpsum settlement cash at once. Additionally, the amount of your debt that gets written off will show up on your credit report as bad debt, and that will stay there for seven years.
Your credit card company may or may not be willing to work out a payment plan, but it costs you nothing to ask them, and negotiating a settlement with them may be cheaper for you than if you consult with a debt consolidation firm. If your credit card debt is substantial and you just can’t make the payments, it’s worth a try.
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