Don't feel like paying off your credit-card debt? How about half?
Filed under: Banks, Bargains, Credit, Debt, Shopping, Recession
Even if your credit card company refused to cut you a deal on your credit card balances just a few months ago, you might want to try again. The New York Times reported today that some credit card companies have changed the rules and are giving front-line customer service reps the right to cut your principal balance, as well as interest and penalties, if your balance is past due.Credit-card companies are realizing it's better to get something than nothing. (And customers seem perfectly happy with the arrangement, if the photo of one smirking consumer in the story is any indication.) Now that people don't have equity in their homes, there really is no option for unsecured debt.
In the past, credit-card companies could take you to court, get a judgment, and then try to collect by putting a lien on your home or garnishing your wages. But with unemployment high above 9%, even wage garnishment is often not an option for collecting from deadbeats.
Credit-card companies must write down a balance to zero once a person has been delinquent for six months. That doesn't mean they won't stop trying to collect the debt, but it does mean they have to show the loss on their books. With 6.5% of credit card debt at least 30 days past due in the first quarter -- the highest percentage since the Federal Reserve starting tracking it in 1991 -- credit-card companies need to do something, however desperate, to stop the bleeding.
In the Times article, only Bank of America and American Express admitted they were giving their customer service people more leeway to settle debts by cutting principal as well as interest. But the American Bankers Association acknowledges that settlements are be becoming more common.But before you stop paying your credit card bill, consider: Your credit score will take a big hit because it will show that you did not pay as agreed for seven years. But if you can get the creditors off your back and clear out some bills, you can work on rebuilding your credit score once you get back on your feet.
It can take two to three years to get back to a decent score if you start paying all remaining bills on time. Also, don't expect to be able to get anything but secured credit for awhile.
The card companies aren't the only ones bargaining with customers. These days, the public is increasingly willing to haggle whenever the mood hits. The blog FreeMoneyFinance today posted "How to Ask for and Get A Discount at a Chain Store," a set of guidelines that demands more sleight-of-hand than blithely informing your card company that you only feel like paying off half your balance.
The site suggests "Eight phrases that win discounts," and while some beggar belief -- "If I buy two of these Tiffany necklaces, then can you give me 25% off?" -- they definitely signal a new era. These days, the customers -- even the deadbeats -- are the ones in control.
Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Improving Your Credit Score.
Reader Comments (Page 1 of 13)
6-17-2009 @ 6:08AM
The Professor said...
About a year ago my credit was a mess from medical bills and some overspending. If you've never had that problem you can't believe how it messes up your life. It's hard to buy any big ticket item or even get a good job with bad credit. I found a blog, http://www.fastcreditrepairs.info/ ,that really gave me the information I needed to get my credit and life straightened out. It helped me so well that I was recently able to buy a car and pay the lowest interest rate possible. If you have credit problems you might want to check it out
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6-17-2009 @ 9:36AM
loretta said...
what about my sisters credit she robbed a local day care of 68,000.00 will she ever get a good job and good credit again?
she can not find a room mate and wants one badly...what can seh do?
6-17-2009 @ 6:23AM
Mike said...
If the credit card companies have been charging you between 20% and 30% for years, you're not a deadbeat regardless of what people may think or this article may conclude.
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6-17-2009 @ 6:43AM
gary said...
Now this really pisses me off,,,,, everything thats done to help any one is for the ones that are not paying there bills.......when do the peole that are paying there bills get a break.. WHEN IS IT OUR TURN TO GET SOME RELEIF, JUST BECAUSE WE ARE PAYING OUR BILLS ON TIME DOES NOT MEEN THAT WE ARE NOT STRUGELLING,, WHERE IS OUR HELP>>>>>
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6-17-2009 @ 8:36AM
Violet said...
Stop whining and learn to spell! What is wrong with you, other than the fact that you can't get the break that others are getting??? I cannot stand people who are so mean and spiteful and must whine about everything! It's people like you who ran our country into the ground. "Well, this won't benefit me, so I'm going to veto it." "Well, this will put more money into my pockets, so I'll support it."
The time for Bush-like attitudes to be gone!
6-17-2009 @ 9:43AM
Sherina said...
I understand that you want a break from paying your credit card bill on time but the issue is that this is a debt that you yourself build up and if you can afford to send you minimum monthly balance while some people are falling behind because of losing their jobs I do not understand why you are complaining. Just stop paying your bill and you too can get these benefits. I am sure that the people that are falling behind would rather have JOBS to pay their bills on time versus being behind in their bills and not having the funds to even try to pay their bills. That whole selfish attitude of why can someone do what I can't needs to really stop it sounds like pre-school antics "she hit me first".
6-17-2009 @ 10:04AM
NancieK said...
Everyone is struggling, some more than others. While I don't agree with this means of a solution, I can understand where the banks are coming from. I honestly believe that if you make your own hole you should live in it. I did in my 20's. I have credit card bills too just like everyone else but I try so very hard not to let them get out of control where they become an unnecessary financial stress. I budget and then way the pros and cons of buying things I really don't need. It sucks to not indulge but in the long run it's the better decision if it means paying for my groceries, mortgage, utilities vs. my Am Ex bill.
6-17-2009 @ 11:08AM
pete said...
I know exactly how you feel. I have about 30% of my neighborhood getting tax breaks, bank breaks on their home loans, government assistance on this and that, and all of them are looking for more, and whining because it isn't coming quick enough or big enough. I've paid my bills, worked hard to make sure what I owed was paid, if not on time, then as soon as I possibily could.
BTW, I'm the only one in the neighborhood with NO tats, NO body piercings, NO body jewlery, and my car is as it came off the line, not all pimped out. What really tees me off is that so many people who are getting Democrat help from the government are the one who make poor financials decisions or spend all their money on BS instead of holding up thier end of the deal, their financial responsibility to lenders.
6-17-2009 @ 12:42PM
Mark said...
Amen Gary. What is the incentive to be punctual with our remittance to bills? Why is it that credit card companies try to increase my interest rate to offset their so called 'loss' of profit due to others being delinquent with their payment. When American Express raised our interest rate, my wife contacted them and gave the ultimatum of setting the interest rate back to what it was or they would have another delinquent account. They apologized, said it was an automated mistake, and returned our interest rate back to normal. These days, there are more reasons to NOT pay your bills than there is to be punctual. Somebody please calm me down!
6-17-2009 @ 12:47PM
Rick said...
The reward you get is a higher credit score. The satisfaction that you feel from being up to date on your payments is just a plus. My wife and I have been on time for our payments with the exception of three times after hurricane Katrina. Our interest rates on Credit Cards that we were never late on tripled. We had savings and that is all that saved us. My $5000.00 per month went to $25.00 total, for the six months after Katrina. We have paid off almost all of our cards and I won't use them again. I bear no ill will toward persons that are cut a break by the CC companies. They have probably already paid enough.
6-17-2009 @ 1:51PM
robert said...
If you pay your bills on time there is no prize. They will cut your line of credit by saying you have too much debt even if you pay every month on time. Thats what being a good customer gets you. There is no bonuses for the good guys anymore. So when I can't make my payments anymore I figured I've done enough.
6-17-2009 @ 6:26PM
mel said...
yea Ebay offers a free kit thats all good but the fine print reads.......... you pay a monthly fee for the service it aint much but its still there plus a fee for selling your product.If you dont sell you still pay a monthly fee ! ITs not just ebay its any of them
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6-17-2009 @ 6:54AM
elementaryfinance said...
With defaults going up, companies are learning that with certain types of consumers (high credit risk) it's better to take something rather than nothing. It's cheaper in the end.
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6-17-2009 @ 7:13AM
B said...
What makes the credit card companies think that if someone is struggling with a $100 payment each month that raising the interest rate from 3% to 31% making the payment on a high balance close to $500 a month will get them paid?
Bank of America raised he interest rates to 31% on 2 of my accounts. American Express didn't on my BLUE card and neither did DISCOVER... And guess what? I'm still paying AMEX and DISCOVER and BANK OF AMERICA can whistle for the payment. I had NEVER been late with a payment, and each account was OVER 20 YEARS OLD and in good standing. And We Gave THEM BAIL OUT MONEY?
I KNOW it killed my credit score, but sometimes we have to JUST SAY NO. I called and told them lower my rate back to where it was and I'd keep paying. They said no and now I send nothing and will continue to send NOTHING. The payments after the raised interest rate were IMPOSSIBLE for me and pretty much they said "too Bad". Well, I said too bad on the debt and NOW I'm getting letters say "Call us! We want to help in these hard times." They can Kiss My Broke A$$!!!
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6-17-2009 @ 7:34AM
Pam said...
You rock! This is the attitude all of us need to have. How dare they indiscriminately raise interest rates to obscene levels and think there would be no repercussions. They are getting their just desserts now and I hope more people stand up and follow your courageous lead.
6-17-2009 @ 7:38AM
don't-bank-with-BOA said...
The same thing happened to me wit Bank Of America. They are crooked!
6-17-2009 @ 8:33AM
karen said...
there you go ,smart people quit paying their credit cards that charges high interest rates, we have already paid them over and over, bank of America can go suck glad i don't have their card
6-17-2009 @ 7:17AM
Richard said...
All the ads on credit card reductions really make me angry. Be reckless and charge any thing you want even if you can't afford it and when you don't pay the bill these companies will negotiate with the card companies to reduce your debt. Don't worry about it, those that have integrity and are honest and struggle to pay their bills will pay higher rates and fees to cover the losses. It is a "legal" way to steal.
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6-17-2009 @ 7:19AM
Ugh said...
I agree that again people who aren't paying their bills are being rewarded, however, I would rather see something of the debts collected rather than nothing since everyone who does pay their bills will ultimately take the hit if nothing is paid on them. It's almost like when theives steal from a store, who gets the hit, the paying customer. Plus much of this is coming from people who have lost their jobs so ultimately the companies should work with them to get something. I would say even to cut the amount due till like a dollar and just let the debts rack up interest until they can pay again. These people did allow things to get out of hand but judging by the number of companies and banks that incurred problems over the last several months the little man definitely is not the only one to blame. Big businesses are filing bankruptcy like crazy and banks are falling like rocks from the sky so evidently to be professionals they didn't know how to manage money either.
In the end, the banks/card companies need to be cognisent of one thing. At the end of the day, once all this is over they will need these people to be their customers again. Maybe not credit card wise but in many other ways. Would you really want to be a customer of someone that tried to give you the shaft????
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6-17-2009 @ 7:19AM
sam said...
Deadbeats~smirking~ sorry I can't go any further with this article. It is so obnoxious. Look here now~no job no money no pay! get it got it good. WE are certainly not deadbeats however this obama administration must be because there are no jobs for the intelligent. get it got it good
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