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Many people deep in debt may feel powerless to get their creditors to give them a break. But nothing could be further from the truth. Under the right circumstances, and armed with the right knowledge, you can win concessions from banks, credit card companies and others that you owe.
Your next step now is to use the list you created in Day 3, contact each creditor and ask for a lower interest rate. Depending on how much debt you have, doing this one step alone can save you hundreds, if not thousands of dollars – not to mention shave many months or years from the time you’ll be paying off your debt.
You Have Leverage
Don’t make the mistake of thinking that just because you owe money you don’t have any power when it comes to dealing with credit card companies. The truth of the matter is you probably have far more leverage than you realize. If you’ve been making your payments on time (even if only the minimum amounts due), that credit-card company doesn’t want to lose your business. So if you call and say that you have a better offer (or that you could get one) from another financial institution, they will probably lower your interest rate on the spot – or at least put your account under consideration for a rate reduction if you pay on time for, say, six months straight. They know it’s a competitive market, and consumers get deluged with low-rate credit card and balance transfer options week after week. It’s well worth it for a credit grantor to consider lowering your interest rate, rather than lose your business altogether because you initiate a balance transfer from another company.
Six Things To Ask For
Here are the main objectives when you call a creditor about your account. Depending on your circumstances, you want the person on the other end of the phone to do any or all of the following:
- Lower your interest rate
- Stop late fees
- Eliminate over-the-limit charges
- Upgrade your account to “current” status
- Remove a negative mark from your credit
- Accept a partial payment in lieu of the total due
Before you contact credit card companies, however, there is something I’d like to share with you to help you separate the myths from the facts when you get ready to negotiate.
The Biggest Myth about Credit Card Companies
I think the biggest myth about credit card companies is that they are big, impersonal institutions that aren’t willing to budge in order to help consumers in financial trouble.
The reality is that credit card companies are run by individuals, and armed with the proper knowledge, perspective and strategy, you can get a lot of help from the right individual at these institutions.
Getting Your Creditors To Work with You
Probably the most productive thing you can do to get your creditors to work with you is to initiate the process. As painful as it might seem, yes, I want you to actually pick up the phone and call them – instead of the other way around. I know some of you have gotten used to ducking telephone calls from banks and department stores, asking your kids or family members to fib and say you aren’t home, or disguising your voice to avoid dealing with your creditors. But beginning today, you’re going to be proactive about knocking out your debts. And it starts with you figuring out a workable plan – something that works for the creditor, but something that you can also live with.
Be frank about your situation. If you have recently lost your job, are going through a divorce, have gotten sick and been unable to work, or whatever, let your creditors know about it. Again, part of your strategy (yes, it’s a strategy, but you only want to say what is honest and accurate) is to appeal to that person’s sense of fairness and compassion. After all, you are dealing with another human being – even though some people who’ve been browbeaten by debt collectors might argue otherwise.
Now, I realize that it’s not always realistic or practical to rely on someone else’s willingness to help you out of a bind. In fact, I’ve heard horror stories about consumers who tried to work out financial arrangements, only to be berated by debt collectors that used foul language and clearly had no compassion whatsoever. I’m not talking right now about dealing with collection agencies – they’re a different story. I’m referring to your direct negotiations with creditors, like Visa, MasterCard, or Sears.
Next – Day 5: Call Your Creditors and Negotiate (Part 2)
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Lynnette is a personal finance expert, author and speaker.