Knowing how to negotiate with credit card companies can significantly reduce your current interest rate or enable you to settle your debt without damaging your credit score. Credit card companies are under increasing pressure to negotiate with borrowers to protect themselves financially and retain customers.
Tips on How to Negotiate with Credit Card Companies
It is important to remember that creditors benefit as much as you do when your account is current and your payments are manageable. Credit card companies negotiate with borrowers when it is in their best financial interest to do so. Your goal is to convince them that they are better off working with you than forcing you to default on your loan. Avoid playing the sympathy card, as most creditors have no interest in your personal financial situation.
Tips for Negotiating Better Interest Rates
If your account is in good standing, and you have a history of making your payments on time, your credit card company will likely reduce your interest rate. You may be able to negotiate a lower interest rate even if your account is in default. Lower interest rates can make your current balance more manageable, enabling you to pay off your debt more quickly. You can also ask your creditor to waive any accumulated late fees.
- Show your credit card company you have alternatives. Save up low-interest card offers you receive in the mail. Your credit card company does not want to lose your business, or your balance, to a competitor. By proving to your current lender that you have other offers worth considering, you motivate them to negotiate with you.
- Do not take no for an answer. Once you are ready to negotiate, call the number on the back of your card and ask for a better interest rate. Generally, the customer service representative you reach by phone will tell you that interest rates are non-negotiable. Ask to speak to a supervisor with the authority to negotiate rates.
- Be honest, but firm. Explain to the supervisor why you deserve a lower interest rate, and tell them you are willing to transfer your balance to a competitor if they do not lower your rates. Chances are high that your current credit card company will offer you a rate reduction, but expect to be turned down, at least initially.
- Follow through with your threats. Transfer your balance, and immediately call to close your account. Most credit card companies will then direct you to a "closing specialist" who will offer you new incentives to keep your account open or to transfer your balance back. Whether or not you accept these offers is up to you.
Tips for Negotiating Debt Settlements
Debt settlements are possible on any unsecured loans you have, which includes credit cards. Some creditors may settle debts for as little as one-third the original balance owed. Whether or not you qualify for a debt reduction settlement depends on many factors, including your total balance and the policy of your credit card company. However, several things will improve your chances of settling your credit card debt.
- Call your credit card company immediately if you are unable to make your payments. Some credit companies are more likely to negotiate if your account is in good standing. Do not wait until your account is in collections before calling. Creditors spend a significant amount of money and resources trying to contact debtors and collect debts, and they nearly always add this sum to your account balance.
- Develop a payment plan before you call. If you want to pay back all or part of your balance, but need your payments reduced or put on hold to do this, figure out when and how much you can pay before you call your credit company. Be clear when speaking to your creditor, and explain why you are behind and how you can catch up on your payments. Let them know that you want to pay off your debt, provided they are willing to work with you.
- Expect to pay a lump sum of money. Rather than risk you filing for bankruptcy or stopping payment completely, many credit companies will greatly reduce your amount owed if you pay a large lump sum toward your account balance. Often, a lump sum payment is required for any balance reduction at all. Therefore, you need to look at your finances before calling to determine what, if anything, you are able to pay.
- Take notes, and know your rights as a consumer. Keep a record of every conversation you have with your credit card company, and write down the names of anyone you speak with about your account. Insist that you receive settlement terms and information in writing before you send them any money. Keep a record of every call made to your home for collections, and research your rights before agreeing to anything that seems unfair or suspicious.
Seek Consumer Credit Counseling
Most consumer credit counseling services are nonprofit organizations funded primarily by contributions from lenders. A credit counselor will work with you to determine how you should approach your debt, and they are trained in how to negotiate with credit card companies on your behalf.
While credit counseling services may be able to get better interest rates than you can on your own, and while they will stop collection attempts against you, you will still be required to pay the full balance owed on your accounts. Most consumer credit counseling services will not negotiate balance reductions, and you will continue to pay interest on all your open cards.