How to Negotiate With Credit Card Companies

How to Negotiate With Credit Card Companies

Credit Card help for single parents usually comes too late, and some, quite frankly with no credit card experience, and largely irresponsible, shouldn’t have a credit card at all. Be that as it may, there are many single parents out there with more cards than they can handle, and a lot of piled-up debt who are looking for help. If you are serious about paying off your debt, there is credit card help for single parents available for you to follow. The ‘b’ word everyone tries to avoid uttering is bankruptcy.

If you are at the stage where your financial debt is destroying your life, it is time to take a serious look at your finances and do something about it. Swallow your pride and make an appointment with a counselor at the institution where you’ve borrowed the money and try to negotiate a settlement. This can be a long and arduous process which requires a true commitment to become debt-free and get back your old life. If you don’t, you face a series of unwelcome telephone calls and will seriously impact your credit card, and maybe even your tax bill the following year.

Credit Card Help For Single Parents: Vital Steps When Negotiating With Credit Card Companies:

Step One – summarizing your accounts

  • Take a hard look at your financial situation and decide if you have access to a large sum of money to make a lump sum settlement. As far as credit card advice for single parents goes, this is the best and fastest way to achieve your goal provided you have the money. If you are expecting a big insurance payout, or money from your employment and it is definite, you can perhaps arrange to pay off the debt in three payments. Don’t stall the process by waiting for inheritance money which might take months for you to receive.
  • Talk to your bank and ask whether you can have a work-out arrangement whereby the bank eliminates or lowers your interest rates and stops charging punitive fees such as late fees or over-limit charges. This might be a temporary arrangement to get you on your feet, but it gives you time to sort yourself out. At this point you have to expect that your credit line will likely be cut and that you will not be able to use your credit card. You could ask them to overlook or forgive past punitive fees to further reduce your balance which they may or may not agree to. The repercussions to your credit card will depend on how the company reports the arrangement or your payments to the credit bureaus. Your bank may also be willing to offer credit card help for single parents and work out a specific plan for you.
  • If you are averse to the idea of dealing with the company directly, you can opt for a debt management program. This allows you to approach an agency affiliated with the National Foundation for Credit Card Counseling or the Association of Independent Consumer Credit Counseling Agencies. A counselor can offer you great credit card help for single parents and can help you facilitate making arrangements with all your creditors on your behalf. All your accounts will be included in the program. Note that while being in a debt management program in itself won’t hurt your credit; the shutting-down of your accounts will in all likelihood hurt your score unless all are maxed out anyway. Still, it’s a better option than bankruptcy. The quality of counseling might not all be the same, but they’re honest according to an economic editor of the radio show, Marketplace Money. The advice from consumer advocates is to beware of for-profit-debt-settlement companies as a non-profit shouldn’t be charging you anything unless it is settled. The typical cost of a debt management plan through an accredited agency is a one-time $30 set-up fee, and $15 per month while you’re on the plan. As well, you won’t be turned away if you can’t pay. Apparently, top credit card issuers have become more generous in their debt management plans.
  • If you are under a great load at present, you may also want to utilize a forbearance program which offers you breathing room for a few months. Note that you will pay back every cent you’ve borrowed. Forbearance in the industry does not mean forgiveness of any debt. You still have to pay.

Step Two – Define your debt

Examine your debt and request a breakdown from the company of your bill. Take it item by item. How much did you pay for garbage fees? How much did you blow on nonsense? What are the late fees and over-limit fees? Once you write it all out, you will see it in a whole different way and be in for quite a shock. Take a look at your income too, and what you can afford to pay. You, as a single parent, have to live, you have to feed your children and you have expenses. You should eat and pay your mortgage before you pay your credit card bills.

Rick McElvaney, program director for the Center for Consumer Law at the University of Houston Law Center says that if you had a credit limit of $3000, but have a balance of $5000 with interest and late fees, you may be able to go back to the principal and get a reduction if you pay it off. It’s all up to the individual creditor, he says. Travis Plunkett, legislative director for the Consumer Federation of America adds that one should never cut things too close. In the event of an emergency, you need to plan for the unexpected. Always build in some wiggle room, he says.

Step Three – The Negotiation

You are ready at last to start the negotiation. What do you do first? Larry B. Feinstein, a partner with Seattle-based Vortman Feinstein, and co-chairman of the bankruptcy committee of the General Practice division of the American Bar Association, says that the first thing to do is make a call to the issuer as they won’t respond to a letter. If that is indeed true, it’s pathetic. As well, customer service representatives who answer the phone will probably not have the authority to make any decisions even though they won’t admit it.

When you call the company, ask straight away to be put through to the department that handles settlement or workout arrangements. Ask for someone with the authority to make a deal. Ask that you not be put through to several different people. You want to pay back their money and need to deal with people who are qualified to help you. Once you have the person sitting in front of you, take the name, direct telephone line, email address, and explain exactly why you are there. Write everything down in a notebook, and if you have the chutzpah, ask the representative to read and sign it once he is done. This will certainly let him or her know that you are serious about paying off this debt.

Be upfront, Gail Cunningham, Vice-President of Public Relations for the National Foundation for Credit Counseling, says “You know I want to pay you. What can we do?”. It is almost unbelievable that one should encounter so many obstacles to pay off a debt. One would think that they would be only too glad to receive you. After all, one man’s debt is another man’s profit or livelihood and credit card companies make a lot of money out of other people’s spending needs. The solution of course is to call the company as soon as you realize you have a problem, but card issuers feel loathe to do anything about it until you are in trouble. You can’t win.

Robert Manning, author of “Credit Card Nation”, says that after 180 days, the company removes unpaid debt from the books. To recoup the loss, the company can retain the debt and pursue legal action, or it can sell the debt, generally for around 3 to 11 cents on the dollar, and take a loss on the rest. According to Manning, typically, between 91 and 179 days, the clock is ticking, from the lender’s point of view. They want to get paid, but their time to collect or relinquish the debt is evaporating. During this time the account is transferred to the delinquency division, which is motivated to make a deal before being forced to write off the debt. This is one more window the consumer can use to try and deal.

As to whether a lender can sue before the six-month charge-off window, the answer is yes, but due to an abysmal housing market, creditors realize that litigation expenses are rising while yields are falling, which is why they are taking the unprecedented policy of trying to negotiate with clients as soon as soon as possible, and as early as 61 days, Manning says.

Step Four – the aftermath – what you need to know

Credit Card Help For Single Parents

  • After your initial contact, the issuer will probably freeze your credit limit.
  • Debt forgiveness can have tax consequences. For instance, if a lender forgives more than $600 worth of the principal on your debt, it will report the amount to the IRS via a 1099-C form. If a company allows you make a lump-sum payment — for example, a $2,500 payment to settle a $4,500 credit card bill — you’ll likely have to pay tax on an additional $2,000 in income next year.
  • A settlement could hurt your credit. Before agreeing to a deal, ask exactly how the arrangement you have negotiated will be reported to the credit bureaus. If the bank is forgiving actual debt (charges), it could be considered as a partial settlement. According to FICO’s Paperno, while a settlement satisfies the obligation, the impact to your credit score is the same as a bankruptcy or walking away from your debt.
  • You’re in your situation probably because you lost your job, or because of high medical bills, or the house needing a major repair, or whatever. Sum up your situation. Explain that you still want to honor your commitment. Don’t be frustrated if you get the answer you don’t want or you’re transferred to another department for someone else to deal with. You’ll never beat this kind of frustration.
  • An approach worthwhile considering is to get tough and tell them that if they can’t cut your payments by a certain amount, that you won’t be able to pay.
  • Hard as this next step might be, don’t accept the first offer. Negotiate. Try to come up with a better offer.
  • Under no circumstances should you utter the word bankruptcy. However, if it is something you’re considering, you should say it to them. It might be the relief you are looking for and the only way.
  • Get your new arrangement in writing. People change jobs and the last thing you want is for the counselor you’ve dealt with, to leave and go and work somewhere else and you have to start explaining things all over again. Get everything in writing before you pay.
  • You can also take no steps at all and do nothing. It’s not a practical solution, but it’s an option. An example where this might work would be if you were chronically unemployed because of an injury or for some other reason and had no assets a creditor could seize. This would make you ‘judgment proof’ and your creditors would, at least temporarily, hit a roadblock and you could hopefully regain your footing and start to pay back. This does not mean that they can’t come after your assets at a later date. People’s situation change, and when you least expect it, the sheriff is at your door.
  • If it’s going to take you more than twelve to eighteen months to negotiate settlements with your creditors, bankruptcy might be the better way to go. You can go online or consult a bankruptcy attorney for advice. How to negotiate with credit card companies can save you money if you go about it the right way.

Credit card help for single parents is available from many institutions, where you can receive advice on Credit Counseling, Debt Management, and Debt Consolidation. When consulting these institutions they will review your financial situation and formulate a plan to help you overcome you debt. These institutions specialize in credit card help for single parents and therefore will develop a payment method suited for your personal needs.