07 Jun Don’t be afraid to negotiate your credit card debt
Don’t be afraid to negotiate your credit card debt
If you are reading this, credit card debt settlement may be on your mind. Whether you want to know more about debt settlement -what it is, what options debt settlement companies offer, and how to negotiate debt settlement terms, these simple, straightforward notions are what you might be looking for to arm yourself with knowledge and confidence before making any decision to settle your credit card issues. As the adage goes “Knowing the facts will create the options.” Wanting to learn more about credit card debt settlement, what it is and how to get the most out of it for your benefit is a self-empowerment tool of the times we live in.
If you have credit card debt, of any size, credit card debt settlement and debt settlement companies should not be strangers to you. Knowing the 5 Ws of credit card debt settlement companies will help you be the debt settlement closer you were always meant to be. There’s nothing like avoiding to lose money and pay high-interest rates if you can help it. Know who the credit card debt settlement companies are; which terms and rates are better; why their reputation is good or bad; where they rank among the rest, and how to develop win-win relationships with them.
One of Stephen Covey’s 7 Habits of Most Successful People is to be proactive. Start with the end in mind. You can start to solve credit card debt problems even before they show up. You don’t have to wait until your roof starts to leak before you take action. The first signs you will need credit card debt settlement skills is having one or more cards maxed out. It doesn’t matter whether you owe a little or a lot of money; what matters is your credit to debt for it to show slump your credit score. Furthermore, credit card debt is one of the most expensive debts you can incur. Every penny that you spend on credit card debt interest is a penny you can use towards your portfolio investment fund to create wealth for you and your family. So, congratulations if you’re one those decisive people who take the bull by the horn when it comes to credit card debt settlement.
Start with the end in mind
Set your compass on being debt free. Join the ranks of credit card debt-free Americans who use their credit cards for convenience and points because they pay the full balance every month. Half of credit card users in America have credit card debt. That’s 1 out of every 2 people in the US. Before going any further, let’s review the snowflake and snowball techniques to help you reduce balances, free up cash, and optimize your repayment schedule.
The Debt Snowflake vs the Debt Snowball Method
The snowflake technique is where you prioritize your loans from the ones with the highest interest rate to the lowest and pay them off one at a time. The ones with the highest interest rate are costing you more per every cent. It makes sense to get rid of them first.
The debt snowball method, on the other hand, is when you forget about the interest rates and prioritize the ones that have the largest balance first. Pay off the lowest balance first with this method and your debt to credit ratio will increase along with your credit score.
Put any extra funds into any of these two methods to become debt free. Figure out how long each method will take you according to your specific circumstances.
Put your negotiation skills to work
Be prepared for the possibility that your credit card company may not be willing to negotiate your credit card debt. Credit card settlement companies may be the option for you. But they are not all made equal. Do your homework and research their trajectory. Discuss your situation with a representative, get more than one offer and weigh your options. Another option you might consider is talking to a bankruptcy attorney. When a judge discharges your liabilities you can start to rebuild your personal balance sheet and it might take you less time to recover than if you had settled the credit card debt. But there are legal fees and court costs involved. Do your math when you compare options.
Whatever you do, do not drain your personal 401K or your Roth IRS in an attempt to avoid bankruptcy when you’re drowning in credit card debt. These accounts are beyond the reach of the creditors in most cases during a bankruptcy proceeding. That means you can walk out of a bankruptcy courtroom proceeding debt-free with your retirement funds still generating dividends, interest, and rent.
What do credit card companies want?
Credit card debt is unsecured debt that cannot be seized in case you fail to pay back. It doesn’t work like a mortgage where the property can be seized and sold to recover the loss. Credit card companies may or may not be owned by banks and their sole purpose is to generate profit for their parent company. If your credit card is owned by your bank and you hold a mutual funds retirement account, you might actually be one of its shareholders.
If you have failed to make several payments or are only able to make the minimum payment due on your high balance, the credit card company becomes concerned. They start to see you as a liability and they want to get you to pay your balance. Their main concern is to not have to charge off the amount on their income statement. This may have dire consequences for their stock, the size of their bonus, and the dividend payments to their shareholders.
Because the credit card company stands to lose everything, it’s goal is to avoid having to charge off the account. Most credit card debt is unsecured; all they have to go on is your promise to pay back. It is time for you to negotiate the debt once you realize you will not be able to make payments on your credit card balance and repay the debt.
Negotiation is the key to success
Once you declare bankruptcy, your credit card debt will be wiped out completely and the credit card company will lose everything it has extended to you. That’s why they will be willing to settle your credit card debt for a fraction of the balance, forgiving what you owe, and at least get something back. Initiate the phone calls and even write a few letters to your credit card company. Their last case scenario is a bankruptcy, you can leverage settlement terms with this in mind.
Stay on it and be ready to be patient as it will take weeks to agree on the debt settlement terms once negotiation has started. Let them know you are considering bankruptcy and hoping to work out a cre4dit cad debt settlement.
Types of credit card debt settlement
- A lump sum credit card debt settlement offer is easy to negotiate. If you have a received a bonus, have a savings account you can raid, or can sell something of value, making a lump sum offer is always tempting to the credit card company. Your best bet would be to get $0.25 on the dollar. If your debt is $5,000, you’ll be debt free with $1,250. But if this is not a possibility, try $0.40 on the dollar. Ty not to exceed $0.50 on the dollar offer. But many will want more.
- A repayment plan can be your second best option. The credit card company may be willing to freeze your account balance and schedule payments at a lower interest rate.
- A forbearance agreement can be a temporary solution for credit card debt settlement. It means your balance will be frozen and your interest rate will remain the same as the pre-agreed upon. The late fees and penalties will also be taken out of the picture. This may avoid compounding interest for a fixed number of months until you are able to resume payments.
Disadvantages of credit card debt settlement
- Your credit card account might be frozen
- Forgiven credit card debt balances are going to count as taxable income to the IRS
- Your credit score will suffer depending on the negotiation terms applied to the debt settlement details
Your credit card debt settlement skills can avoid bankruptcy and lower your credit scores. Your credit card company will get some of its investment back but you will not be debt free. Declaring bankruptcy is the only way to wipe the debt out completely, but it also has a cost.