How to Negotiate with Credit Card Companies

Credit Cards Negotiate Credit Limit

As a credit card holder, you may feel like your credit card company wields a lot of power. And while that’s true, it’s also true that the credit company is just that, a company. You’re still a customer and you’re receiving a service you pay for: this gives you more leverage than you may think.

You might be surprised to learn that negotiating with your credit card company often simply takes a willingness to make phone calls, negotiating skills, and persistence. For certain situations, you’re better off first evaluating your creditworthiness and your overall financial health before you start making demands.

But even if you’re in dire straits financially, you can still try negotiating with your credit card company to try to obtain a better interest rate or get a debt settlement plan that keeps your credit score from dipping too low.

Below, we will explore how to go about negotiating with your credit card company to get more favorable terms to pay back your debt, increase your credit limit, and examine other potential benefits:

What terms can I negotiate with a credit card company?

  1. Payment Due Date
  2. Interest Rate
  3. Credit Limit
  4. Annual Fee
  5. Late Fee
  6. Minimum Payment
  7. Long-Term Repayment or Forbearance
  8. Lump-Sum Settlement

What terms can I negotiate with a credit card company?

You may be surprised at the different terms you can negotiate with your creditor. Depending on the company and their specific policies, you might find you can get a lower interest rate, late charges waived, or a favorable long-term repayment plan for credit card debt.

Let’s dive into the specifics below:

1. Payment Due Date

When you sign up for a credit card, your due date is generally automatically set by the credit card company. It will be on the same date every month, but make sure you check with your specific credit card company to find out your exact payment day.

There may even be a specific time you have to submit your payment by, either by the end of the business day (5:00 PM) or by midnight. One item to note: make sure you take different time zones into account.

When you miss a payment or if your payment is late, you may be vulnerable to a host of penalties such as an interest rate increase and late payment fee. Don’t wait until the next billing cycle to pay this fee and the payment because if you’re over 30 days late, the late payment may end up on your credit report. This mark could stay on your report for up to 7 years.

However, your payment due date may be negotiable. You can even change your due date online with some creditors–otherwise, you can speak over the phone with a representative. When and if you change your payment due date, make sure you know which billing cycle it affects so you aren’t caught off guard.

2. Interest Rate

Let’s take a look at this scenario: you’ve had a credit card for a couple of years but your interest rate is higher than average because your credit score isn’t great. However, you’ve been working on your financial health and now, your credit card debt is paid off and all of your loans are current. This might be a good time to ask for a lower interest rate with your credit card company.

Simply asking doesn’t guarantee you will get a reduced rate but a couple percentage points knocked off your rate might mean hundreds or thousands in savings at the end of the year, so it’s worth negotiating. You may have a better chance of successfully obtaining a lower interest rate if you’ve paid down your balance and you’ve been making reliable, on-time payments for years.

While a credit card company won’t necessarily just hand over a lower interest rate, if you mention that you’ve found a lower interest rate somewhere else, you might have a better chance of getting a reduced rate. It pays to do your due diligence: make sure to research competitive rates–but be realistic.

Each credit card company has its own policies and standards based on customers’ creditworthiness. If you find out that you can’t get a lower interest rate, it’s time to simply practice good credit habits to build it up. When you’re on more solid financial ground, you can ask again to have your rate lowered.

Tip: When you call your credit card company, make sure to ask for a supervisor as the customer service representative that you speak to may not have the authority to alter anything about your credit account other than changing your password or retrieving it.

3. Credit Limit

First, what is a credit limit? It’s the top end that your creditor will allow you to charge on one credit account. You may have heard of “maxing out” your credit card – this just means you’ve hit your credit limit. In some cases, going over your credit limit may result in the transaction being declined.

If you do go over your limit, you may also be charged an over-limit fee. Again, this varies company to company.

Most credit card companies like to see a total credit utilization of 30% or lower. This is why a credit limit increase can be helpful: it would give you a more favorable debt-to-income ratio because you’ll have an overall lower credit utilization number.

4. Annual Fee

If you’re a new customer, a credit card company might have waived the fee for you as part of the hook to get you to sign up. However, after you’re a regular customer, it could be harder to get that annual fee waived.

It’s not impossible however, as many companies want to keep their customer retention high and may rather eliminate a fee than lose a paying customer.

As a reminder, there are many credit cards that don’t have an annual fee or you can downgrade your card to a basic card instead of a reward card, which often has a higher annual fee.

5. Late Fee

The most basic way to avoid a late fee is by always paying on time but sometimes, mistakes happen. If it’s your first late payment, negotiating to eliminate the late charge with your credit card company may be possible. Just don’t make it a habit.

6. Minimum Payment

If you’re having financial difficulties, call your credit card company as soon as you think you won’t be able to make the minimum payment. Talk to a representative about what’s happening.

You may be able to negotiate a lower minimum payment. By doing so, you may be able to stay current on your account and be in good standing with the credit card company or bank.

7. Long-Term Repayment Plans or Forbearance

One of the most common credit card issues you might experience is figuring out how to settle credit card debt. In some situations, you might be able to apply for a forbearance, which temporarily relieves you of monthly payments but doesn’t actually change what you owe.

Another course of action is to ask your creditor for a modified payment plan. Before talking to your credit card company, make sure you have access to all of your records so you can thoroughly explain your situation over the phone.

Note: This may have a negative impact on your credit score.

8. Lump-Sum Settlements

Sometimes, the worst-case scenario does happen and you might be close to bankruptcy or be overwhelmed by a mountain of debt. In this case, your creditor may allow you to pay a small fraction of what you owe, this is called debt settlement.

Negotiating credit card debt is important to get a jump on because you want to take action before your account falls into delinquency. Many credit card companies will reach out to you if you fall behind on payments, but not all of them. Ultimately, it’s up to you to figure out how to settle credit card debt. After 180 days, your credit card company will usually write your debt off as a loss and your account will go to a debt collector.

At this point, you might look into a debt settlement program. This typically means going to a for-profit company that does the negotiating with your credit card company on your behalf.

However, there are some risks associated with this debt relief choice:

  • They may require you to deposit money into a savings account for three years or more before your debts will be settled. If you can’t keep up with these payments, you may have to drop out of the program.
  • You might not be able to have any of your debts settled because your credit card company isn’t required to settle for less than what you owe.
  • Often, these companies require you to stop sending payments to your creditors, causing your credit score to dip.

When you get a credit card settlement for your debt, it will show up on your credit report as a “settled debt” which isn’t as satisfactory as “paid in full”, but it’s still much better than a delinquency.

Again, you don’t have to go to a third party to settle your debt. Even after your account has gone into delinquency, many companies may still be willing to work with you to reduce your credit card debts.

Remember, although credit card debts are considered unsecured debts because they require no collateral, if you ignore your account while your debt balloons, you can be sued for repayment. In the case that your creditor wins in court, they might be able to put a lien on your property or garnish your wages as part of the court settlement.

Note: This process may also have a negative impact on your credit score. Keep in mind that the amount of debt forgiven is considered taxable income by the IRS.

With the Right Knowledge, You Can Change Negotiate with Your Credit Card Company

As a credit card user, it might be intimidating to contact your credit card company and negotiate better terms. However, with the right knowledge, you may be able to obtain a lower interest rate or a favorable long term repayment plan to resolve credit card debt.

Keep in mind that you may have an improved chance of negotiating in your favor when you have a better handle on your financial situation: that means a low debt-to-income ratio, being current on all of your accounts, low credit utilization, and no outstanding delinquencies–among other financial factors.

If you can’t negotiate with your credit card company, you can shop and compare to see if other terms at other companies are better. And if you can’t find better terms, practice responsible spending because there are no shortcuts in the world of financial responsibility.

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