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How can I negotiate my credit card debt?

On Behalf of | Feb 15, 2021 | Firm News

You feel stressed with each credit card bill that comes in. You have tried to change your spending habits and stick to a budget but these steps are not helping you. Still, you should not feel despair. In fact, your credit card company may understand your situation and provide you with some assistance.

According to The Motley Fool, you can try to negotiate with your credit card company to reduce some of your debt. This is an option that, while it may have drawbacks, could be of great benefit if you manage to settle your debts and regain fiscal solvency.

Talking to your card company

First, contact your credit card issuer and ask to speak to the debt settlement or financial hardship department. If you get someone on the line, explain your problem and ask about options offered by the company. You may learn about existing settlement programs or you may have to work out a solution from scratch. If you do come to an agreement, make sure you have it in writing before you begin sending money to your card company.

Possible solutions to your debt

Your card issuer may be willing to help you through different methods. You could reduce your debt to a set amount that you will pay in a lump sum. Your card company may also reduce your interest rate or waive your late fees to make it easier for you to pay off what you owe. If you are experiencing short term financial problems, your card company might permit you to pay on the basis of a repayment plan while pausing or lowering your future payments.

The drawbacks of negotiation

Negotiating down your debt could harm your credit depending on how you work things out with your card company. If you settle your debt, it will likely appear on your credit report as settled instead of paid off. This will decrease your credit score because it indicates you didn’t pay your debt even though you settled it.

You may also see a negative impact on your credit if you have your card cancelled as a result of your negotiations. This reduces your credit utilization ratio and decreases the average age of your credit account. Still, even with these negatives it may be worth it to rid yourself of your debt so that you can begin improving your credit.