Negotiating with Creditors
For some people zero is a beautiful number, especially when it used to describe the dollar amount of what you owe in credit card debt, but to get to that auspicious number it’s going to take a lot of hard work and sacrifice.
As of July 11th, 2011 the national unemployment rate was at 9.2% and many economic experts are claiming that we are still in a recession so you mix that in with the rising consumer credit card debt in America that could spell trouble for a lot of US consumers. The average US citizen had around $14k in credit card debt, but on the high end there are millions of Americans that are suffering from excessive credit card debt so that journey to zero has become a tough one to start on.
Creditors don’t especially like it when their customers start calling, and start trying to negotiate lower interest rates, and having fees waived but it’s better than dealing with a charge off. Most credit card companies will try to avoid a charge off at all costs, because that directly affects their bottom line and does not look good to their investors or whoever is in charge of their books. The charge off is the last thing that a company wants to deal with, so even though don’t exactly encourage consumers calling and trying to negotiate lower interest rates or getting their fees waived it’s better than the alternative, which is a charge off, which is a credit card company’s nemesis.
It Never Hurts to Ask
Jeff Palmer was trying to launch a marketing consulting startup, and he was racking up thousands of dollars in credit card debt to get the business of the ground, but once the credit crunch hit around 2009 his interest rates went up to above 20%. This rise in interest rates was making his financial situation almost completely unmanageable so he called the issuer to negotiate better terms for his debts. The creditor agreed to lower his interest rates down to 6%, but only if he agreed to close his accounts. He told the issuer that he would think about it but a week later B of A called him and said that they would lower it to 0% if Jeff agreed to close the accounts. Jeff jumped on this opportunity immediately, but if he never tried to inquire about better terms in the first place he would never had the chance to get a better deal.
A recent report just released showed that about 3 million people successfully negotiated better terms for their debt. So there is a growing trend of customers taking charge of their own financial futures by negotiating lower interest rates, waived fees, and better overall terms for their debt.
Time is of the Essence; Act Early
In this current economic downturn more and more creditors are striving to help their consumers when they get into a pinch, but you must act quickly. If you have a 30 day late on your debts, and you feel that your debt is becoming unmanageable it’s important that you act quickly and contact your creditor to negotiate some sort of deal. Remember, these companies hate charge-offs and that’s the absolutely last thing a creditor wants to do.
Many bigger creditors, like American Express, actually have a program in place to help with re-payment’s of delinquent accounts (as do many other creditors), and many times, accounts will receive some sort of modification in favor of the consumer if you act quickly in the early stages of delinquency.
A consumer should be made aware of the down-side of a modification because some of these modifications can show up on a credit rating and can be viewed as blemish on a consumer’s credit report. Especially if you are in the late stages of a delinquency, like a 90 or 120 day late, and a creditor forces the borrower to close the account that can be very damaging to your credit report.
So it’s very important that you weigh out all your options and asses how much trouble you’re in financially before you start negotiating with these companies.