Credit card debt is a growing problem. And while you might think you’re the only one with hundreds or even thousands of dollars of unpaid bills, you are not alone. Due to rising unemployment, loss of income and recession, many families are experiencing trouble with credit card debt. If you’re already paying for insurance, tax, groceries, car payments and household living expenses, you may barely have enough money to budget credit card payment.
Fortunately, there are solutions even if you are thousands of dollars in debt. The answer is not in hiding. The more we ignore these problems the worst they become. You could end up destroying your credit score, or even provoking the company to file a civil judgment against you. The best solution is to analyze your options and make an informed decision.
The bad news is that unpaid debt does take its toll on your credit right away. Notices are given when a consumer is 90 days and 180 days delinquent. Eventually, the credit card company will turn the account over to a collections agency, and they will be much more aggressive in requesting you catch up your payments.
The best option is to reach out to the credit card companies directly rather than waiting for a collections situation to happen. If you reach out sooner, rather than later, you may be able to negotiate a compromise.
What Do You Say to Creditors?
Now hold on! It’s best not to call up and simply wait on the line and reply with “Uh…” or “Hmmm…” or “Whaa-?” It’s recommended that you decide in advance what you’re going to say. Calling creditors without a definitive plan may backfire, since you may not even verbalize your predicament in a believable way. Some people even become so nervous that they blurt out the worst possible thing to say.
Here’s your game plan. You are basically negotiating a settlement of some sort. If you don’t have the money, the company cannot force you to summon up funds you don’t have. Now, it’s just a matter of deciding when you will have the money and when you can pay.
Here are four points to keep in mind:
- You must show the company why you can’t pay. Clarify your budget and explain why you are behind.
- Take a proactive approach - you don’t just want to give them bad news. Come up with a solution that they can accept.
- Give them a call and make sure the person you are speaking to has the authority to make changes to your account.
- Send them a letter with documentation showing everything you just stated.
- Be sure to provide all contact information in case they want to follow up.
What should you do if the creditor representative doesn’t accept your offer? Then request to be transferred to a supervisor. Practice good people skills in this situation. You are asking for patience and understanding—not demanding anything. Try to establish a good rapport with the person, showing respect and kindness.
Always tell the truth. If you are ever caught in an exaggeration or a lie, it will just make the situation worse. It’s far better to admit that you made an error rather than make up a story that has no basis in truth. When offering a solution, try to formulate a plan that you can work with, and that will realistically catch up your balance within a number of months.
Remember, when you work with creditors rather than collection agencies (who may actually trying to be recovering their losses, since they oftentimes buy past due accounts) they do have the right to waive or even cease fees and interest. Sometimes all it takes is some negotiation skills to work your way out of debt!
