If you are in deep credit card debt, don’t panic, there are ways you may be able to negotiate that debt, and the best part is, you can often do this on your own. Credit card companies always offered some kind of hardship programs to consumers who were savvy enough to ask about them.
But, the experts say there is no better time than now, to ask for such help, since the banks are more inclined to negotiate your debt, due to the impact of the coronavirus. Some of the COVID-19 relief being offered by credit card companies include pausing payments, reducing or forgiving late fees, and pausing interest charges. In some admittedly rare instances, companies are forgiving parts of credit card balances entirely.
Trying to get your card company to reduce your total amount owed has usually been reserved to hiring an outside debt counselor. However, Nikki Dunn, a certified financial planner, suggests you can negotiate credit card debt on your own.
Just use the following script:
Hello, my name is ____ and I have run into significant financial troubles at this time and have fallen behind on my payments owed to you. My account number is ____. It has become impossible for me to manage all of my bills due to (lost job, death in family, medical issues, etc). I’d like to bring my account current, and I am trying really hard to avoid bankruptcy. I have other creditors as well that I have to make similar arrangements with to avoid having to go bankrupt and only have so much cash available to do this, though. I can afford to pay (state the amount–around 30% of balance to start) by (date).
Once I’ve successfully repaid this debt, I’d like an agreement that any negative information given to the credit bureaus be removed from my credit report and the account be settled as “paid as agreed upon”. Thank you (creditor/collector’s name), for understanding and working with me on this. I will make ($ amount of payment) payments beginning (date of payment). I would like to get our agreement in writing from you, then I will be happy to send payment.
“To start the process off, just focus on getting your interest rate lower because that’s really the doozy,” Dunn says. “Start there then move on to the next part of the process, which is negotiating settlements.”
Dunn says that negotiating credit card debt can be an extensive process. It can go a lot smoother if you prepare ahead of time. Start with the following steps:
1. Figure out how much you owe
Before you can negotiate your credit card debt, you need to be aware of your current interest rate and balance on the card. This information is usually available on your card statement or online account, but you can also call the card issuer.
2. Consider your options
Decide whether a lump-sum settlement, workout agreement, or hardship agreement is best for your situation. Dunn suggests getting really clear on how much you’d be willing to settle for.
3. Use a script to outline your terms
Create a rough outline of the terms you want (type of settlement, payment amount, interest rate, etc.) and use a script like the one above to ensure you hit all the right points.
4. Contact your credit card issuer
Once you’ve gathered the information you need to negotiate, it’s time to make the call. Ask for someone who has the authority to approve your request, explain your situation, and make an offer. If you’re not pleased with the terms being offered, don’t hesitate to ask for a supervisor. You can also opt to call back another time over the coming days to speak to someone else if you feel like you’re not making progress. As long as you’re polite, persistence in this type of situation can make a big difference.
5. Take detailed notes during your conversation
While you’re on the phone, type out or write down everything that’s discussed, so you can refer back to it in the future.
6. Get a written copy of your agreement
Before you decide to move forward, it’s important to understand what you’re agreeing to. Make sure to get a copy of the terms in writing from your card issuer.
7. Check your credit report regularly
You can now check your credit report weekly for free until April 2021 with the three major credit reporting agencies: Experian, TransUnion, and Equifax. If you’re meeting the terms of your agreement, the issuer must report to the agencies that you are “current” on the account. But sometimes, banks inaccurately report to the credit bureaus. If you come across any errors or inaccuracies, make sure to refer to the agreement so you can dispute it. The card issuer isn’t required to report that you’re current if you were already behind on your payments at the time of the agreement.
Finally, it’s important to be patient, persistent, and careful when you decide to negotiate, Dunn says. “Each creditor is different, so don’t let one poor experience discourage you from negotiating. If your credit card company isn’t willing to work with you, it may be time to get help from an outside source like a credit counseling agency, but you should always exhaust all options on your own first.”
Have you ever renegotiated your credit card debt? Can you share your experiences below?