Credit card companies modifying more credit card debt
Filed under: Borrowing, Credit, Debt, Credit cards
Are you carrying a lot of debt on credit cards? Have your interest rates skyrocketed? You may be able to negotiate a better deal according to a report in The Washington Post.As credit card defaults soar past 10%, credit card companies are realizing something is better than nothing. Lenders are restructuring credit card accounts by lowering interest rates or minimum monthly payments for a specific period of time, waiving fees or settling the debt by accepting less than what is owed.
Most card issuers don't want to talk about the practice because they fear they'll get too many calls, but industry executives have confirmed the changes in credit card company practices. Moody's reports that the charge off rate for credit cards was 10.52% in July and is expected to reach at least 12% by the middle of next year. Not surprising to hear when they raised so many people's interest rates to 20 or 30% or more.One debtor the Post mentions in its story worked out a modification on credit cards with Citi and Chase to lower his 20% rates as long as he agreed to close the accounts. Both companies agreed to a 6% rate immediately. When he decided not to accept the offer from Citi, a representative offered 0% for 12 months as long as he gave up his cards.
Here's what spokespeople told the Post regarding their credit card-modification policies:
* Bank of America said it expects to modify 1.2 million credit card accounts this year, up from 1 million last year.
* Chase is making it easier for those in the earlier stages of delinquency to get modifications. Last year it restructured credit lines for more than 600,000 customers, It expects the need for modifications to increase this year.
* American Express would not comment on how many people are enrolled in repayment plans, which can include forgiving some debt, but did confirm it is offering repayment programs more frequently.
*Citi says it's proactively reaching out to customers not delinquent but showing signs of stress. It's modifying interest rates and matching payments to help customers retire debt more quickly.
If you do seek to modify credit card terms, your credit score will likely be hit negatively initially. But as you make on-time payments and pay down your debt levels, your score will go back up.
Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Improving Your Credit Score.
Reader Comments (Page 1 of 1)
9-10-2009 @ 5:54PM
BankVibe.com said...
We were forwarded this Washington Post article as well. 10.24% "charge-off-rate" is ridiculous!
http://bankvibe.com/are-credit-card-companies-willing-to-negotiate/
Reply
9-11-2009 @ 8:29AM
Evelyn Guzman said...
It's a good thing that the credit card companies are heeding the plea of a lot of people. Their stepping on the plate to make it easier for the debtors bodes well for the economy, I think. This will eliminate the feeling of panic and the loss of confidence which will be reflected on the lower retail sales and such.
Evelyn Guzman
http://www.debtchallenges.com (If you want to visit, just click but if it doesn’t work, copy and paste it onto your browser.)
Reply
9-11-2009 @ 5:40PM
Alessandro Machi said...
The problem is the credit card companies are offsetting those who take advantage of these secret programs on the backs of millions of americans who do not know the programs exist.
Reply
9-15-2009 @ 11:23AM
ja1oant said...
I agree that some of the banks are ready to restruction payment plans because they know if they turn to a credit collection agency, they will get pennies on every dollar and it makes sense that they that they make every effort to contact the clients and stretch out, up to 5 years, to allow the consumer a chance to make any kind of payment. They still ruin your credit so if you take the payment plan, they close the account and you are still not able to use the account, even though you have a positive amount for use. I had the issue that put me out on disability and my funds have been halved and the cost of the medicine that I need are taking the amounts of repayments to some and none. I think, and this is my opinion is when I make a $100.00 payment, $80.00 goes into fees and the principle is only $20.00. if I am correct, it will drop off the credit report in 7 years. I use cash only. I learned a valuable lesson on wanting everything new. "cars, furniture and almost everything" I pay in cash. No car payments, no repo's and I am so happy. I may have to save for awhile but I have gotten a lot of a satisfaction that everything I have is mine. Not me and the bank but paid straight out, mine. I have found some of the best items from others. I am visionable. When I go out to my garage, I see where my money is. My cars are free and clear and I just make sure they are maintenced by a trusted person to keep them lasting for a long time. I purchased a 2006 Mustage, fully loaded, for $7000.00. The blue book value is way over that if the car is wrecked or resold, I will not be "upside down" in payments.That means you owe more on the car than it is worth. I purchased a new car for my daughter for her 16th birthday. I was really concerned with the safety features in she was in a collision. I put no money down and accelerated the payments. She was in a 3 car wreck and the features of the vehicle saved my precious baby, she was pushed under a SUV and hit from the rear by a SUV. The driver that caused the accident, paid the car off, gave me $4500.00 and $1000.00 because the car had equity in it. Then it put my insurance into underinsured and I got $2500.00 more. I got a free car. I am glad no one was seriously injured but my daughter had to be cut out of the auto, stablized and transferred to the hospital. We still haven't settled on her medical lawsuit which is more funds coming in. Of course, due to my living expenses, most of my neighbors have "toys." We wash, clean up the inside and use our "toys" on the weekend only. We have other vehicles that we use during the week so the "toys" are used to play with on the weekends. Everyone, learn how to pay cash and have a bank account that has a small amount in it for references only.
Reply
10-01-2009 @ 2:27AM
Rockon said...
I think. This will eliminate the feeling of panic and the loss of confidence which will be reflected on the lower retail sales and such.
http://investmentloss.net/
Reply
10-07-2009 @ 6:21PM
sitzbettys1 said...
I am disabled and was without any health insurance at all until this past june but 2 years ago i had to go to the hospital it was a matter of life or death the 3 days cost me almost $14,000 i am making very small payments.I used the credit card for my medicine which is $400 a month. The card i have been trying to lower my rate will not when i got a letter that the rate will be 29.99% so asked for a low rate and they said no and i closed it and told them if they can't help me then i can't pay it. My credit is ruined anyway and they can do what they want to i wanted to do right but in these days it is hard to live.!!!
Reply
10-07-2009 @ 6:39PM
Betty said...
I tried to get get ny credit card rate lowered i am disabled with medical bills and i had no health insurance for 3 years and i had to go to the hospital for 3 days it cost $14,000 and just got medicare in june i want to pay my bills but when they won't help so i can i guess they think nothing is better.
Reply