Can I Negotiate Credit Card Debt Reduction

"Can I negotiate credit card debt reduction?" Yes, you can negotiate a reduction with your credit card issuers or you can work with a non-profit counseling service which can do the negotiation for you. Either way, it is important to know what to expect and to make the commitment to pay off the debt.

Negotiate Credit Card Debt Reduction

The first step in debt reduction is to understand your debt situation. You need to know five facts about your credit card debt:

1. How much you owe to each credit card issuer – This is your outstanding balance.
2. Current interest rate and APR on each credit card – These numbers are found on your monthly statement. Your statement may show that you are paying different interest rates on different portions of your outstanding balance. If so, your statement will show those individual interest rates as well as the APR which reflects the total amount of interest you are being charged over a one year timeframe.
3. Current minimum monthly payment on each credit card – The payment is based on a percentage of your outstanding balance – usually three to five percent. The amount will increase or decrease each month based on charges or payments to your credit card.
4. Average amount of finance charges you pay monthly on each credit card – The finance charges are shown on your monthly statement. If you haven't saved your monthly statements from prior months, just call your credit card issuer and the customer service representative can tell you your finance charges for at least the last three months.
5. Maximum amount you can afford to pay to pay on your credit card debt each month – Review what you have paid each month for the last three months. Can you increase the funds available to pay off your credit card debt if you cut back on what you are spending on other items?

You can do your own negotiations with your credit card issuers or you can work with a credit card counseling service or debt reduction service that can negotiate on your behalf. Using a service might be reflected on your credit report, so it can be preferable to do your own debt reduction negotiation.

Regardless of who does the negotiation, you can try to reduce the amount of debt by either:

• Reducing the current debt
• Reducing the future debt

Start your negotiation by asking "Can I negotiate credit card debt reduction?" You will probably be transferred to another individual at the credit card issuer who has the authority to negotiate a debt reduction.

If you have a short-term problem and are not able to make the minimum payment you can ask the credit card issuer for help. They may be willing to either:

• Give you temporary "hardship" help by lowering your monthly payment for a short period time (like three monthly statements) to give you a chance to get back on your feet financially
• Establish a repayment plan for 36 to 48 months during which you can spread your existing debt. This can lower your monthly payments and allow you to pay off all the debt with a lower interest rate than you would have been charged without the repayment plan.

Credit card issuers prefer to receive the full amount that you owe – not to reduce the total debt you already owe. However, if you are not able to pay off the debt, the issuer may be willing to reduce the debt so that they can at least get part of the outstanding balance paid. You will probably have to prove that:

• You are unable to pay all of the debt. Your credit card issuer may ask you to submit information about your finances such as proof of income or copies of bank statements or prior tax returns.
• You are willing to make a commitment to pay off the debt. Offer to have the minimum payment automatically removed from your checking account each month.

Some credit card issuers are willing to negotiate down the current debt by 30 to 50 percent. As with any negotiation, it is always to your advantage to start the negotiations by asking for a larger reduction, and then be willing to settle for a smaller reduction. For example, if your financial situation is keeping you from paying the minimum balance on a $10,000 balance on your credit card you can start the negotiation by asking for a 75 percent reduction ($7,500) – but remember that the card issuer will probably only be willing to reduce that debt by $3,000 to $5,000.

The easiest way to reduce future debt is to put your credit card away and start using cash. Don't cancel your credit card account. You want to keep it open since that it will show that you have available credit, which will help your credit score.

Negotiating a lower interest rate is not difficult. You may be able to negotiate a lower interest rate if you have a good credit score and a good payment history.

It is not uncommon for a cardholder to receive an interest rate reduction of seven to ten percentage points. Your 19 percent interest rate could be reduced to just ten percent – saving as much as 50 percent on your finance charges each month. A few tips:

• Be polite, but persistent.
• After you are offered a lower rate, ask the rep if there is anything you can do to get an even lower rate. For example, can you:
  • Have a lower rate for six months
  • Have a lower rate if you set up automatic payment from your checking account
• If the credit card rep isn't willing to reduce your rate, politely ask to speak to someone who might be able to give you more of an interest rate reduction.

If you don't want to do your own debt reduction, you can use a non-profit debt settlement service. Non-profit does not mean that this service is free. The service will usually charge you a fee which is based on the amount of savings they are able to negotiate for you.

There are many companies available. Be sure to check out the company with the Better Business Bureau before you make your decision on which company you want to use to negotiate your debt reduction. One of the largest services is Consumer Credit Counseling Service, a nationwide, non-profit accredited agency with offices in most major cities.

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