Posted: April 10th, 2012 | Author: Joe | Filed under: Credit, Debt, Tips | Tags: Credit Debt, Debt Negotiation, debt settlement, debt solutions | 6 Comments »
If you’re one of the millions of credit card holders who has found themselves buried in credit card debt with a balance you can’t hope to pay down, then you may be wondering if you can Negotiate Your Credit Card settlement yourself. Well, it is possible to do, but it’s not easy.
3 Ways To Negotiate a Credit Card Debt Settlement Yourself.
The first thing you need to consider is what kind of arrangement you are going to seek. Let’s be honest, you’d like your credit card company to forgive all your debt and pretend it never happened, but short of bankruptcy, that isn’t likely to happen.
Once you’ve accepted the reality that you will need to pay something, you need to determine what that something will be. Here are 3 possible debt payment solutions to offer to your credit card company when you make the call.
I. Lump-sum settlement.
This is by far the easiest to understand and to sell to your credit card company, but it’s often the hardest to carry out, because you need a large sum of money available.
Since most credit card issuers aren’t going to negotiate until you are behind, one strategy is to stop making payments to the credit card company and put that money (and as much extra as you can afford) into a savings account for a few months.
This is what many debt settlement companies do for you, or at least it’s what they say they will do for you. In many cases, they hold the money and let the credit card company come after you for the full debt owed anyway. It’s a big reason why debt settlement is not a good idea in many cases.
If you have access to a chunk of money, they you can make an offer to your credit card issuer for a 1 time payment that is less than the full amount you owe.
WARNING: This technique will likely hurt your credit score, but then again so will having a high debt balance and not paying it off…
II. Workout arrangement.
This is a much easier option to carry out than the lump sum. The Workout arrangement is when the bank agrees to freeze your interest payments and late fees while you payback your balance. This is also the most ethical solution in my opinion, because you’re telling the credit card company that you will meet your obligations and pay back what you owe, as long as they agree to stop pushing you back under while you do it.
WARNING: You will most likely no longer be able to use your credit card, since the bank will probably lower your limit. This is a good thing in the long term though, since it will keep you from racking up even more debt. However, the lower credit limit will increase your debt-to-income ratio, and lower your credit score.
III. A Forbearance Program.
This one is probably the easiest solution to sell to the credit card company, but not the best for your bottom line. A forbearance program is an agreement by the bank to pause your payments and interest fees while you get your finances back on track. This is like taking a timeout to gather your resources for the next play.
The next play though is usually getting back on a payment plan in which you agree to pay the full amount owed and any interest and late fees accrued – forbearance is not forgiveness.
Final thoughts.
Whichever solution you choose, keep in mind that these are tough times for everyone – credit card companies included. They can’t get blood from a stone and they know that. Credit card holders still have a lot of leverage and everything is negotiable. Job loss and negative home equity have put the squeeze on banks trying to collect full payment.
You can use one of the debt solutions from above as a starting point, then see what else you get bargain down in the process. For example, you might get the bank to forgive all late fees and interest fees and give you a forbearance if you agree to pay the full principal. It all depends on your situation, and is up to the individual creditor.
Regardless of which solution to choose, be sure to get your credit card issuer’s agreement in writing before you send them any money.
Also, be sure to read How to Negotiate Your Credit Card Debt for more detail on the actual process behind making the call.
…and for your own sake, stop living beyond your means or you’ll find yourself back in the same place further down the road. It’s the number 1 reason why Debt Settlement And Loan Consolidation Don’t Work.
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Posted: February 3rd, 2011 | Author: Joe | Filed under: Credit, Debt, Tips | Tags: 0% balance transfer, Credit Cards, Credit Debt, Debt, getting out of debt, Guest Post | 1 Comment »
A balance transfer credit card is a tool that can be used either effectively or haphazardly as a debt relief solution. A consumer has an opportunity to relieve some of the burden of debt but in many cases, the balance transfer card is too much of a temptation that results in even more debt. Should balance transfer cards be considered a solution to consumer credit card debt?
Here’s a look at how things work:
Understanding Balance Transfer Credit Cards
Credit card companies issue balance transfer cards to a target market of consumers who actively use credit cards. The balance transfer cards typically offer a low (or no) interest rate for a promotional period of time – usually 6-12 months. A consumer can use the balance transfer cards to move existing credit card balances to one card and consolidate the amount of credit card payments they make each month. Provided a card holder can pay off the entire balance placed on the new card at the lowered interest rate within the promotional time period, a balance transfer credit card can be a valuable tool for debt elimination.
Understanding the Risk of Balance Transfers
While the resource can be ideal for some consumers, there are also risks associated using this tactic. Traditionally, using other credit cards to pay off credit card debt has been known to start a vicious cycle of bad debts. However, if there is a sufficient plan in place for effectively paying off the total balance before the low interest rate ends, the benefits are greater than the risk.
It is the temptation that may make balance transfer cards a non-viable resource for eliminating debt. Cardholders that consolidate their balances to one card only have one payment to make each month. They may become inclined to either use their now balance-free card to make more purchases or allocate the ‘extra’ money they have after consolidating payments for other things besides debt elimination. The vicious cycle of spending more than you have is often a big factor for consumer continually in debt. Adding a new credit card to the mix may be a dangerous financial move.
How to Make It Work
If you still have good credit and can get approval for a balance transfer credit card, you must first make some considerations about your finances and spending habits before signing up.
Say you consolidate $3000 worth of balances from several other credit cards. Your low interest rate period of the balance transfer card is 12 months. You have to calculate the outstanding balance divided by 12 months to figure out how much you need to pay each month to be debt free within the year. In this case, you would need to pay at least $250 a month, every month for a year to zero out the balance. You also have to factor in the interest charges on the card each month so add a few more dollars to your monthly payment to account for that. Even if your minimum payment each month is only $75, you need to commit to allocating a full $250-$275 a month to eliminate the debt in time. Resist the temptation to only pay the minimum and spend the rest elsewhere.
Compare Offers
If your credit is good and you have the option of several cards, make sure you check the terms and conditions of each of the balance transfers to find the right one for you. You may be tempted to sign up for the first offer you get, but it is in your best interest to find the card that best suits your lifestyle.
You may be approved for a balance transfer credit card but be cautious of your limitations. You may have $5000 in existing credit card balances but only a $2500 limit. Work out the numbers to see if it is worth making transfers if you can only deal with a portion of your total balance owed.
Stop Spending
Once you have zeroed out your other credit card balances, stop spending beyond your means. A clean slate may be too strong a temptation so consider taking the cards out of your wallet and only use one for emergency purposes – at least until the balance transfer card is also zeroed out.
This is a Guest post from Jeff Weber of SmartBalanceTransfers.com.
Jeff Weber writes about saving money and reducing credit card debt with balance transfers at SmartBalanceTransfers.com, a website designed to educate consumers about 0% APR balance transfer credit cards.Related Posts:
Posted: November 3rd, 2009 | Author: Joe | Filed under: Credit | Tags: CNN, Credit Cards, Credit Debt | 2 Comments »
They got their credit card company to back off and slash their payments by taking their plight to CNN:
Chuck and Jeanne Lane got some good news earlier this week: After more than doubling the Lanes’ monthly minimum payment, their credit card company is now slashing their payment.
The Ohio couple was featured in a CNN story about credit card companies jacking up rates in advance of a law going into effect that would prevent them from doing that. Because of the story, the couple says their bank agreed to give them relief
Unfortunately, this is not an option for most people.
The problem is that the credit card regulations recently passed by Congress don’t go into effect until February of 2010, and credit card companies are in a race to rack up fees and interest payments while they still can.
Some members of Congress are taking action once again. For example, Rep. Betty Sutton introduced a bill Thursday that would ban fees on people who don’t carry debt. This is a direct response to some credit card companies imposing fees on responsible customers who pay off their balance every month.
Another Representative, Betsy Markey, has introduced a Credit Card Rate Freeze Act to eliminate the ability of credit card companies to increases the interest rates before new regulations go into effect.
Ultimately the only way you can really be sure to fight a credit card rate hike or imposition of new fees is to pay off your balance every month, and have the financial freedom to be able to take you business elsewhere if the credit card company doesn’t want to work with you.
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