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Working out a new payment deal with a credit card company

By Lucy Lazarony · Bankrate.com
Monday, November 22, 2010
Posted: 12 pm ET

Struggling to make the minimum payments on your credit card debt?

Contact your card company for help. A credit card company may agree to reduce your interest rate or lower the minimum monthly payment on your credit card debt for a few months. And some credit card companies may even agree to a more affordable repayment schedule as part of a hardship plan or workout agreement.

Or a credit card company may agree to nothing at all.

"You might not get any relief," says Bill Hardekopf, chief executive officer of LowCards.com and author of "The Credit Card Guidebook."

Not all credit card companies offer hardship plans. And some credit card companies may decide not to cut you any kind of break at all after reviewing your customer history.

"If you're not a good customer they're not going to do as much for you," Hardekopf says.

To find out what kind of payment relief is available from your credit card company, you'll need to call and ask. Don't be afraid to ask for a supervisor if the first customer service rep you speak with isn't able to help.

Be polite and honest about your financial situation. If you've been laid off from a job, say so. Asking for a decrease in your interest rate is a good place to start. Be sure to remind them of how long you've been a customer and all the years you've made your payments on time without a hitch.

And if you need more than a few months help with your credit card payments, you may want to ask the issuer about a workout agreement or hardship plan.

Linda Sherry, director of national priorities for Consumer Action, a consumer advocacy group based in San Francisco, says there are two types of hardship plans that card issuers might offer:

  • A set number of fixed amount payments that the customer could afford that would pay off the credit card debt in five years.
  • A lump sum settlement.

With a fixed amount, five-year payment plan, the card company may agree to make interest rate adjustments and waive late fees, Sherry says.

With a lump sum settlement, a credit card issuer may agree to settle a credit card debt for less with a large single payment from a credit card customer. Securing a lump sum settlement with a credit card company is more difficult to achieve, Sherry says.

Agreeing to a debt settlement with a credit card company may help your wallet, but it will also hurt your credit. So weigh your debt relief options carefully.

If you fail to strike a deal with a credit card company on your own, you may want to seek help from a certified credit counselor.  To find a legitimate agency go through the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

If your credit is in good standing, you may want to consider transferring your balance to a card with a rock-bottom introductory interest rate.  That super-low teaser rate will knock down your minimum monthly payment for the duration of the introductory period, often 12 months or more.

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1 Comment
Chris
December 08, 2010 at 9:12 am

I've found that when you ask creditors to lower the interest rate, you get more pushback. I've seen more success emphasizing the need for a lower payment. For example, explaining that you've had a reduction in income and while you have some money available to pay on the bill, you need a lower payment to keep up. If they agree to lower the payment, the interest rate will also come down.

Also, whether or not you've been a loyal customer for decades does not seem to have much of a bearing with most major creditors. In fact, the person who has been consistently struggling with their payments usually stands a better chance of getting a workout agreement since the creditor is more fearful of taking a loss.