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.
Take the first steps to building your portfolio.View Course »