How to negotiate with Credit Card companies

How to negotiate with Credit Card companies for lower dues or Settlement

If you miss a payment on your credit card, it can eventually lead you to miss other payments as well. When this happens, your outstanding balance will begin to accrue interest and late payment fees as well. If you have ever been in this position, you've probably thought that your remaining debt is unmanageable.

Many folks in India find themselves in this exact scenario. So, the good news is the banks generally will negotiate settlements with you if you know how to approach them.

This article will explain how to accomplish this as well as other things to consider.

Why Is Credit Card Debt So Hard To Pay Off?

Many credit card companies charge up to 30%-45% yearly interest on credit cards. When you only pay the minimum payment, you're primarily paying interest, so it will take a long time to pay off your credit card.

When you add job loss, medical expenses, or multiple EMIs to that debt, you can put yourself into a financial bind.

Credit card users can use the following methods to help with their debts:

1. Reducing your interest rate.

2. Getting late fees waived.

3. Transferring outstanding balances to an EMI loan.

4. Paying the full amount due, but for a lesser dollar amount.

Negotiating these terms should be done with care.

What is a credit card settlement?

A credit card settlement is an agreement with a lender to reduce your entire credit card debt to a lower amount. For instance, if you owe ₹2,00,000 on credit cards, but cannot make payments at that rate, you may negotiate with the lender for a one-time payment of ₹1,20,000 to settle your account.

Your credit score will be impacted when you pay a credit card account off by way of settlement because it will be indicated on your credit report as a "settled" account, instead of a "paid in full" account. As a result, you will have a temporary drop to your credit score.

As such, care should be taken to understand the consequences of your actions before you act further.

A comprehensive instruction manual for negotiating a settlement on your credit card debts

Step 1: Determine Your Financial Status

In order to properly prepare for your negotiation with your credit card issuer (or issuing bank) you must first determine how much you will need to pay off your credit card debt(s). The easiest way to do this is by the following:

• Calculate how much you owe on each credit card account you have.

• Identify how much money you make each month.

• Find out how much of that income you pay monthly as expenses.

• Determine how much money you can afford to pay off your credit card debts all at once.

You will have a better chance at successfully negotiating your settlement if you can demonstrate to the bank your current inability to meet your debts and/or their interest in negotiating with you.

Step 2: Contact Your Credit Card Lenders Collection/Settlement Team

Contact your credit card companies via customer service (1-888-222-4CUSTOMER SERVICE) and request to be transferred to either the collections or settlement department. Speak to a representative and discuss your financial situation honestly and courteously. Generally, banks will be very receptive to negotiating with clients that demonstrate an interest or desire to cooperate.

If you are currently receiving collection calls from the credit card companies then you may wish to specifically ask for one-time settlements.

Step 3: Request a Waiver of Charges and Interest First

When making a settlement request to your credit card company, you may wish to consider negotiating for waivers of:

• Late fees

• Interest

• Moving the balance to a lower interest (EMI) payment option

In some cases, banks will agree to waive previously charged interest if you agree to enter into a repayment agreement. Always view settlement options as your last resort.

If you cannot repay, you may negotiate for a reduced amount (lump-sum settlement).

The following types of items that can be negotiated with banks include:

• Your repayment history (have there been previous repayments made)

• How long the default has been outstanding

• Financial problems during your default period

• The cost for the bank to collect the default (recovery).

Payments must never be made orally. Always get an email or a certified letter confirming the payment before sending payment.

THE SETTLEMENT LETTER

Before you make any payment, verify that the letter contains the following items:

• "Full and final settlement"

• No further balance will be outstanding

• Your credit card number and the amount of the settlement

• It was sent on the official letterhead from the bank.

After making a payment, you will also need to obtain a "No Dues Certificate."

Note of benefits of negotiating credit cards:

• Stops the number of calls made to you by debt collections companies

• Avoids any potential legal issues

• Decreases the amount of total debt owed

• Provides you with financial freedom

It’s important to understand that negotiating credit card debt will have a temporary negative effect on your credit rating. You will want to work on rebuilding your credit rating after you negotiate credit card debt; you can check your FREED credit score to devise a plan for improving it.

Mistakes To Avoid When Negotiating Credit Card Debt

The first mistake to avoid is ignoring the calls of debt recovery agents for an extended period of time. The longer you ignore them, the more interest you will accrue.

Another mistake is working with less than reputable debt settlement services that say they can negotiate guaranteed settlements without doing the paperwork. You should always work directly with the creditor to negotiate your debts; if you can’t do that, hire a professional advisor.

Never pay cash to a collection company to settle your debt. You should always pay debts directly to the financial institution that sent you a letter regarding the amount due.

Finally, do not take out a new high-interest loan to pay off existing debt. This will only complicate matters.

Will You Be Negotiating on Your Own or Finding Someone to Assist You?

There are two choices:

1. Negotiate on your own.

2. Use a professional for counseling or settlement.

If you believe you have the confidence, structure, and communication skill, you should definitely go down the path of being responsible for your own negotiations.

However, if you are experiencing:

• Use of several credit cards

• Aggressive collector phone calls

• A number of legal notices sent

• Made multiple late payments

• Any form of confusion regarding the documents provided to you

You should seek out assistance.

FREED can help you settle your debt legally, build a plan to repay your debt, or be consolidated into one debt, depending on your specific circumstances. In addition, there will always be a safe and legal process involved.

Can’t I Just Consolidate My Debt Instead of Settling?

If you have a good credit rating, you may want to look at consolidating instead of settling your debts.

Consolidating your debt means combining multiple credit card payments into one payment (which would be a reduction) for the lowest interest available. This is why you will have to pay each with credit card right now rather than waiting to settle your loans.

If you qualify for it, this is likely to be your safest option to protect your credit rating going forward.

You can speak to an expert at FREED to understand your options for your specific circumstance (settlement vs. consolidation).

Tips for Making Debt Negotiations Work

• All correspondence should be done via written communication.

• Keep track of everything you've sent and all conversation history including e-mail and phone call recordings.

• Do not ignore any type of legal notices that you may receive regarding your debt.

• Do not make promises that you cannot fulfill or that you do not intend to keep.

• When it comes to improving your credit rating after settling or consolidating your debt, start small with your checking account.

How to Negotiate Credit Card Debt Settlement in India?

If you are struggling with too much credit card debt, negotiating a credit card debt settlement can be a lifesaver. However, negotiating credit card debt is not just about negotiating lower amounts; it is also about ensuring that you do not end up ruining your credit in the future.

If you are considering negotiating credit card debt, you must know the options available to you. Document everything you send to the credit card company and any conversations you have with the credit card company about your debt.

Confused about what to do? FREED can help you legally settle your loan(s) as well as help you deal with multiple loan(s) and rebuild your credit rating.