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Settling with your credit card company

Posted by Andrew Chan December 15, 2008 10:30 AM

I am planning to borrow some money from a family member for little or no interest. I would like to use it to pay off three of my credit cards totaling $15,000 dollars. What would be the best way to get these companies to lower the total amount owed so I can pay them off for less?

If you are having difficulty meeting your credit card obligations, one option may be to try to negotiate a settlement with the credit card companies directly. Credit card companies may be willing to provide you with various forms of relief including reducing your interest rate, reducing your monthly payments, waiving late payment fees, reducing the total amount that you owe, or extending your payment period.

If you decide to contact them to negotiate some form of relief, you should contact them as soon as you suspect that you will have difficulty making your payments. Let them know if you have experienced any financial hardships (such as a job loss or a medical emergency) that may have contributed to your inability to make timely or full payments. Also, discuss the things that you are trying to do to remedy the situation. These steps may give you a better chance of successfully negotiating a settlement with them.

Each credit card company may handle your situation differently. Some may be willing to work with you to avoid the collection process while others may refuse to negotiate with you at all. In either case, it is still to your benefit to at least ask the question.

Keep in mind that negotiating with your credit card company for a settlement is only one option available to you. Additional options such as debt consolidation, credit counseling, debt refinancing, and bankruptcy should be evaluated and understood. There are advantages and disadvantages to each of these options and you should evaluate each of them given your specific financial situation before deciding on a how to proceed.

You can learn more about debt management and credit counseling by visiting the websites of The National Foundation of Credit Counseling at www.nfcc.org and www.debtadvice.org.

tags credit cards, debt
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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.
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About the contributors

Jill Boynton is co-founder of Cornerstone Financial Planning in Newington, N.H. Along with traditional financial planning services, Boynton provides analysis specifically for divorce.
Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.
Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master’s in business administration from Boston University.
Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.

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