August 1, 2024
Negotiating with a credit card company to lower your debt can seem like a daunting task. We look at how to handle this and look at the pros and cons of what many credit card companies may offer you during the process.
Credit cards have become a fact of everyday life. Online shopping, major purchases, and even everyday purchases are all reasons for using our credit cards more than we should.
However, this convenience can sometimes lead to financial strain with high bills or credit cards becoming maxed out. It may feel like you have no way out when this happens, but you do have some ability to control the situation through negotiation. Negotiating with your credit card company could allow you to find relief from these stressful circumstances.
Not all credit card debts can be resolved by negotiating with the credit card company; most probably can't, but there are some ways to tell if your debt can be.
The more credit cards you’re carrying a large balance on, the less likely it is that you’ll be able to resolve it through negotiation. If you have only one credit card with a high balance, however, it’s much easier to negotiate with only one credit card company instead of multiples.
If you have debt on multiple cards, then debt consolidation may be a better option. It lowers your monthly interest rate and combines all your debts into one easy payment; even this won't work for everyone.
If you're unsure what will work for you, then consider speaking to a Licensed Insolvency Trustee; they can evaluate your situation and are ethically bound to act in your best interest when showing you all of your debt relief options.
If your balance is well beyond what you can afford to pay, even if it were reduced significantly per month, then it’s unlikely that negotiating with the credit card company will be of much use.
If this is your situation, you should also consider reaching out to a Licensed Insolvency Trustee who can assess your entire financial situation and lay out every debt relief solution available to you. This assessment is completely free and confidential. Licensed Insolvency Trustees are neutral arbitrators with debt and do not work for your creditors.
Your balance is the amount of money you owe. Know your exact balance before reaching out to discuss a way for you to lower your payments. You can find this information through your credit card company's app or their online portal. You can also call your credit card company and ask them to provide you with your exact balance at that moment.
This information will be key in the negotiating process.
Credit card companies have some common solutions for anyone looking to negotiate their credit card debt. We’ve included them below, along with a basic understanding of their pros and cons.
It’s important that before you call a credit card company, you know which of the options you want. That way, you can suggest it to them and see if they’ll be willing to work with you on it. It’s also important to know which ones you DON’T want for your situation.
A lump-sum settlement is where you negotiate to pay off a portion of your debt with one payment; in return, the credit card company agrees to consider your debt as paid in full and writes the remainder off.
Pros: You get out of debt fast. A lump-sum payment means that once you pay the agreed-upon amount, you are no longer in debt. With this approach, you also avoid interest charges.
Cons: Opting for a lump-sum payment agreement often requires having a significant amount of money available upfront. It can also affect your credit score if the credit card company chooses to report that you did not pay the full amount you owed.
A payment plan is where you and the credit card company come to an agreement to reduce your monthly payments in exchange for you paying the full amount back over a longer period.
Pros: Choosing a payment plan allows you to lower your monthly payments and improve your credit score over time as you pay the full amount back.
Cons: The biggest issue with payment plans is the higher cost in the long term. Paying back the debt over a longer period means paying more in interest charges as well. It also becomes an issue for your credit score if you fail to meet the lower monthly payments.
This is where you and the credit card company agree to modify the terms of your loan. This can mean many things, including restructuring the debt, modifying the payment terms, reducing interest fees, or even sometimes waiving them altogether.
Pros: You can find a way for you to pay back the loan on terms you can afford.
Cons: Entering into a workout agreement will negatively impact your credit score, although adhering to the terms of the agreement and repaying the loan fully can help you recover it. If you do not manage to keep up with payments during the workout agreement, your account may be frozen by the credit card company.
When speaking to a credit card company on the phone to negotiate the reimbursement of your debt, it’s crucial to review the terms with them and write down the key information yourself before hanging up. This way, you’ll feel more confident about what you’re being offered before making a decision.
If you negotiate with a credit card company and decide to come to an agreement with them, you need to get it in writing. You can then ensure that what they’ve offered you is the same deal you agreed to on the phone.
Again, it’s vital to review all the terms and conditions before agreeing to anything. If there is something you don’t understand, you can either call the credit card company for an explanation or take your agreement to be seen by a professional. There are many non-profit credit counselling organizations that could help with this.
Not all credit card debts can be handled with negotiation. If your situation is more complex and you need help, speaking to a Licensed Insolvency Trustee is the best place to start. Licensed Insolvency Trustees are professionally authorized to offer debt management advice and are regulated by the federal government of Canada. During a free consultation, they can lay out all your debt relief options and help you understand the pros and cons of each, so you can choose the one that’s right for you.
August 1, 2024
Negotiating with a credit card company to lower your debt can seem like a daunting task. We look at how to handle this and look at the pros and cons of what many credit card companies may offer you during the process.
