How to Negotiate with Credit Card Companies

Consumers may be interested in negotiating with credit card companies for the sake of reducing credit card debt, or to reduce the interest charged on the balance that is invariably carried over to the ensuing month. Since these scenarios are very different, the willingness of the card companies to consider negotiations with the card holder also varies. In the following paragraphs, we tell you more about both these scenarios, and how it can affect the credit scores of the individual.

Lowering Interest Rates

A customer who has been regularly paying off at least the minimum balance on his/her credit card is in a position to negotiate and request that the latter consider the cardholder’s appeal to reduce interest rates. Since the Credit Cardholder’s Bill of Rights was signed onto law in May 2009, the ability to negotiate and lower interest rates has assumed a great deal of significance. Most companies have hiked interest rates in anticipation of the stringent provisions that they would be required to adhere to from the year 2010.

A good negotiator should always have a bargaining chip. In this case, a balance transfer credit card that offers a low introductory annual percentage rate (APR) will work splendidly. If one can find credit card issuers who are willing to offer 0% introductory APR cards, one can easily drive a hard bargain and convince the existing credit card issuer of the prudence of lowering interest rates, lest the consumer switches companies. Even if the providers are unwilling to consider lowering the rate of interest, a consumer may be able to convince the former to increase the credit limit on the credit card. This will have a positive impact on the consumer’s credit utilization ratio, provided he/she keeps the spending in check. The net result is improved credit scores. The trick is to remember that even if one does not get what one desires, there is no reason why one cannot get something better!

Reducing Debt

People who are bogged down by credit card debt, often wonder whether it is possible to negotiate and reduce the amount of debt. Normally, companies will not be willing to consider negotiations with a consumer who has defaulted repeatedly on credit card payments. However, there may be a few situations where companies may be willing to consider negotiations.

A consumer who is on the verge of filing for bankruptcy has a better chance of negotiating with credit card provider companies to reduce debt. The company may be willing to consider negotiations since the chances of recovering unsecured debt become bleak if the consumer files for Chapter 7 bankruptcy. However, if the consumer has a good job and is earning reasonably well, but is still lagging behind on payments due to overspending, the credit card company may sue the consumer, get a writ of garnishment, and withhold up to 25% of the wages of the consumer in lieu of unpaid debt. In other words, the credit card company will not consider negotiations if it feels that the debtor is still in a position to pay. Again, if the consumer is in financial distress and is thinking of filing for Chapter 13 bankruptcy or the wage earner’s bankruptcy, the credit card company may decide to wait it out rather than negotiate with the errant consumer. The best strategy for the consumer is to impress upon the credit card companies that he/she is on the verge of filing for bankruptcy.

The aforementioned tips for negotiating with credit card companies will work only if the cardholder is a really savvy negotiator skilled at lowering unnecessary expenses or a consumer whose financial distress makes it impossible for the credit card companies to recover the dues.