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.
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