How to Deal and Negotiate with Credit Card Companies

Thursday, October 21st, 2010 at 11:54 pm

Most people are not aware of the fact that they can negotiate better interest rates on their credit cards. Likewise, they are unaware that they can often negotiate debt settlements or lower payments if the situation calls for it. As such, they usually hesitate to take any action before it is too late and their debt has been transferred to a collection agency.

People fail to realize that credit card companies are just as interested in their customers being up to date with their payments, which usually involves ensuring that their customers can manage their payments. Therefore, when negotiating with credit card companies it is important to present the situation in such a way that results in a favorable outcome for the lender as well as the cardholder.

Lowering Interest Rates on Your Credit Cards
Negotiating a lower interest on your credit cards will provide a significant benefit to you in the long run, especially if you cannot pay off your purchases in full every month. A lower interest rate will lead to overall lower costs, even if it will not necessarily reduce your monthly payments, which will save you a substantial amount of money.

Negotiating with a credit card company is just like any other type of negotiation meaning that you need to be in a position of power. This might seem impossible but as long as you have a good payment history and all your accounts are current, then you have a pretty good chance of getting what you want.

If you have a good credit score, you can always apply for other credit cards that offer better rates, and you need to make sure that your current card issuer is aware of the fact that you have better alternatives. Remember, as a customer who has a good reputation, you are in a position of power because you have proven to be a good income generator with little to no risk for the lender. This means they will want to make sure not to lose you.

The best way to prove you have other options is simply to collect any offers you receive in the mail offering a better interest rate than the one you currently have. Of course, this alone won’t be enough and you need to be persistent. No matter what, do not accept a negative answer even if that means transferring your balance to another card.

You should expect the first answer to be a no because lenders do not make money by giving in the second someone asks for something. However, if you play your cards right and are persistent, you shouldn’t have a problem with lowering your interest rate.

In a negotiation, you should never simply ask for exactly what you want because that leaves no room for a counteroffer. Therefore, if you are looking for a 2% reduction on your interest rate, consider asking for 4%. By giving the lender the flexibility of negotiating they are more likely to approve your request, especially if it appears you are accepting their terms.

One important aspect of negotiation is not to make empty threats so if you are playing the angle that you will opt for another card, you will have to follow through. The good news is that as soon as you apply for a balance transfer and close existing credit cards, before the process is final, your current lender will usually offer you a better deal just to keep you as a customer.

Negotiating Debt Settlements on Credit Cards
You have the option of negotiating a debt settlement on any unsecured loans you might have, which includes credit cards. While this will not clear you of debt and you will need to have a lump sum available to settle the debt, it still means that you could potentially come to an agreement with the lender to pay as little as a third of the debt. This is because credit card companies prefer to lose part of what you owe rather than losing everything completely.

However, it should be noted that this strategy will not work in every case or with every credit card company. It depends greatly on how much you owe, your payment history and the company’s policies.

As soon as you believe there is a chance you won’t be able to make payments, you need to call the lender. You shouldn’t wait until your debt is transferred to a collection agency because this will increase the amount you owe as any additional expenses the credit card company incurs with your debt will be added to the total bill.

When you make the call you need to have a plan figured out. You can’t simply call as say you want to negotiate a debt settlement without a clear proposal. You need to work out how much you can afford to pay as a lump sum and how much you can afford in monthly payments. On the call, explain your financial situation objectively without playing the sympathy angle as this tactic tends to backfire. Simple explain why it is impossible for you to make payments and present them with the alternative you have come up with.

Additionally, make sure that any agreement between you and the credit card company is drawn up in writing. A telephone conversation will not be sufficient since the lender can always claim that the person who made the arrangement was not authorized to do so. This is less of a risk you have the signatures of the people authorized to make these decisions.

Negotiating better terms for your credit cards may seem a daunting prospect at first, especially since most people think that these conditions are set in stone. However, with a little perseverance, a little due diligence on your rights and a good alternative proposal, you might be surprised at the results.

Author Bio: Mirsad Hasic is the editor of Think-CreditCards.com, a consumer oriented site where you will get help with finding the best credit card deals for your specific needs, learn how to consolidate your cards, get tips on efficient credit card debt elimination strategies and more.

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