10 Tips for Communicating with Your Credit Card Company

You know how health problems generally get worse when you ignore them? The same thing happens with credit-card debt. The sooner you contact creditors and work out a mutually agreeable payment plan, the easier it is to get relief. Most creditors will negotiate with people who are having trouble paying bills. These negotiations can result in reduced payments, waived late fees and extended due dates.

It is important to talk to creditors as soon as you have financial difficulty, however, not after you've started to receive calls or letters demanding payment. The longer you procrastinate and pretend that a debt problem will go away, the less cooperative creditors are likely to be. Here are 10 tips for communicating with creditors:

1.Call creditors as soon as you realize you can't pay your bills. Explain the situation -- often it's divorce, disability or unemployment -- that is causing financial difficulty.

2. Explain any encouraging financial developments, such as a pending divorce settlement, disability benefits or a new job. Creditors may be more inclined to work with you if you'll have future income.

3. Propose an affordable alternate payment plan -- for example, half of the required minimum payment for three months with no late fees.

4. Keep a log of the dates and times of phone calls to creditors, the name of the customer service representative you talked with and terms of the agreement.

5. Follow up calls with a letter that restates the agreed-upon terms. Send the letter by certified mail with a return receipt requested and include the following information:

  • First paragraph: Account number and current interest rate and required payment.
  • Second paragraph: Cause of financial difficulty (brief description).
  • Third paragraph: Specific reduced payment proposal (such as, "We request that you accept $50 a month through June, report our account as current, and waive any penalties.").
  • Fourth paragraph: Request for a response, stating that you will assume the creditor agrees to the terms unless you hear otherwise.
  • Contact information: Address, daytime and evening phone numbers and email address.

6. Resist pressure to pay more than you can afford. Neither you nor the creditor will benefit from an agreement that is doomed from the start.

7. Request that creditors remove negative information, such as late payments, and re-age your account. (That means that it is reported positively as long as negotiated payments are made.)

8. If creditors resist your efforts to negotiate a reduced payment, call a Consumer Credit Counseling Service office. Often, creditors waive late fees and reduce minimum payments for people receiving counseling. For more information about credit counseling, call 1-800-388-2227 or visit the National Foundation for Credit Counseling online.

9. Keep creditors informed about continuing changes in your financial situation, such as prolonged illness or prolonged unemployment. If necessary, negotiate another extended repayment plan.

10. When all else fails, send creditors a small monthly payment, even if it is only $5 or $10. This shows that you're not ignoring your debts, and you'll avoid those computer-generated letters that automatically get mailed when no payment is made.

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