How to Negotiate Credit Card Debt: A Step-by-Step Guide
Oct 02,2023 · 4min read · 271 views
Early in August, the Federal Reserve Bank of New York stated that credit card debt levels have crossed $1 trillion for the first time in America’s history. “Credit cards are the most prevalent form of household debt and continue to become even more widespread,” reads the New York Fed’s blog.
Credit card debt can feel like a never-ending rollercoaster. If you are running behind on credit card payments, there is one way to navigate the crisis. You can negotiate payment terms with the creditor and pay less than your original debt amount.
You've got more power in this situation than you might think! It's time to roll up those sleeves and dive into the world of negotiating your credit card debt like a pro.
Step 1: Know Your Numbers
Before you start any negotiation, gather all the information such as total debt, interest rates, minimum payments, and any fees. This is your starting point, and it's crucial. Study what the other creditors are offering as this may come in handy while negotiating.
Familiarize yourself with the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Billing Act (FCBA). These acts are here to protect you, so know them well.
Step 2: Consider All Debt Settlement Options
2.1 Workout Agreement
In a workout agreement, you can mutually decrease interest rates, forgo cancellation fees with your creditor or extend the deadline. It can also include lowering monthly instalments and your borrowing limit.
Before working on this agreement, chalk out a realistic timeline and interest rates that are feasible for you. You can even take into account any upcoming promotions, additional incomes and expenditures in the foreseeable future while planning this.
2.2 Lump-Sum Settlement
In a lump-sum settlement, you can settle the debt in one go. You can propose a lower amount of the total sum you are owed if you have that kind of savings. Remember, you can also borrow from your family or friends to settle this debt and repay them later. The only advantage here is you won’t have to pay any interest to your loved ones.
Opt for this option only if you have proof that you can settle the amount in a single payment. If you settle for a lesser amount, you might be considered for a tax. Consult a tax professional before finalising the deal.
2.3 Hardship Plan
You can opt for hardship or forbearance programs if you have gone through a medical crisis, injury, sudden job loss or any other financial emergency. Your creditor will consider reducing your payment or interest fees based on your case.
Please note that not all creditors offer hardship programs.
Step 3: Pick a Negotiating Route
You can either hire a debt settlement company to help you negotiate on your behalf or do it by yourself. If you are on your own you can either write a letter, call your creditor or have an in-person meeting to discuss debt settlement. Keep a record of all the conversations and note down every point for future reference.
Step 4: Lay it All Out
This is your chance to spill the beans. Explain your situation honestly and clearly. Maybe you lost your job, had unexpected medical expenses, or just got a bit carried away with online shopping. Whatever it is, own it and let them know you're committed to finding a solution.
Step 5: Know All Risks
Once the creditor has agreed to negotiate, ask them all the risks associated with the new deal. For instance, in a lump sum agreement, your credit score will suffer or your account will be temporarily frozen. In other cases, may need to pay additional taxes. Discuss what happens if you are not able to go through with the new deal.
Step 6: Get it in Writing
Upon reaching an agreement, make sure you get all the details in writing. This includes the agreed-upon settlement amount, the due date, and a confirmation that the debt will be considered paid in full after the agreed-upon amount is paid.
Step 7: Keep Your End of the Bargain
You've made a deal - now it's time to stick to it! Make sure you pay the agreed-upon amount by the specified due date. This is your ticket to debt freedom, so don't drop the ball now. A few weeks after you've settled your debt, pull your credit report and make sure it reflects the agreement accurately. It should show the debt as "settled" or "paid in full," not as a lingering balance.
Remember, negotiating credit card debt is a skill that takes practice. Don't be discouraged if it doesn't go perfectly the first time. Stay persistent.
Top Travel Credit Cards for Adventure Seekers in 2023
May 03,2023 · 10min read · 301 views
Are you looking to travel the world but on a budget? If so, getting a travel rewards credit card is an excellent option to get the best deals on hotel stays, flights and other such travel expenses.
Travel rewards credit cards are credit cards with rewards and benefits for travel-related expenses. You can earn rewards by using the card to make various purchases and then redeem them for travel expenses. These also include travel benefits like airport lounge access and travel insurance.
6 credit cards to help you collect maximum travel - related rewards:
1) Chase Sapphire Preferred
The Chase Sapphire Preferred offers 3x points on dining and travel purchases and 1x points on all other purchases. It does not stop here. If you use this card to book flights or hotels, you can earn 5x points per dollar spent and 2x for Uber, Airbnb, train tickets, etc. Other benefits include trip cancellation/interruption and baggage damage insurance, auto rental collision damage waiver, trip delay reimbursement and more. Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening.
Capital One Venture Rewards has a simple, straightforward rewards program with no annual fees. You'll earn 1.25 miles per dollar on purchase and 5 miles on booking hotels and rental cars. You can also transfer your miles to partner airlines and hotels, giving you even more flexible options for your rewards.
Earn 20,000 bonus points once you spend $500 on purchases within the first 3 months from account opening.
● Minimum credit score: 670 ● Minimum credit limit: $5,000 ● APR: 0% APR for the first 15 months. After that, it will be 19.74%, 25.74% or 29.74% ● Annual Fee: $0 ● Foreign Transaction Fees: 0%
3) American Express Gold Card
The American Express Gold Card offers 4x points at U.S. supermarkets, 3x points on flights booked directly with airlines or through amextravel.com, and 1x points on all other purchases. You'll also receive a $120 dining credit each year. Additionally, you get a $100 credit and 2x membership reward every time you book a prepaid stay of at least two consecutive nights at Amex Hotel properties. The card also covers car rental and damage loss, trip delay and baggage insurance.
● Minimum credit score: 670 ● Minimum credit limit: Will be informed at the time of application ● APR: 20.74% to 28.74% ● Annual Fee: $250 ● Foreign Transaction Fees: 0%
4) Chase Freedom Unlimited
The Chase Freedom Unlimited credit card has great features but no annual fee. Their cash- back offers include 5% on travel and 3% on dining and drugstore purchases. There is no expiry date on cash-back redemption as long as your bank account is functional. Earn a $200 bonus after you spend $500 on purchases in the first 3 months from account opening.
● Minimum credit score: 670 ● Minimum credit limit: $500 ● APR: 0% APR for 15 months. Post that, the APR will be between 19.74% to 28.49%. ● Annual Fee: $0 ● Foreign Transaction Fees: 3%
5) Citi Premier
The Citi Premier card offers 3x points on travel (including . gas stations), points on dining, supermarkets and travel and 1x points on all other purchases. The credits on hotel and car rental bookings are 10x, making this one of the highest reward points*. If your hotel stay bill is $500 or more (excluding taxes and fees), you get $100 off once every year. Earn 75,000 bonus points after spending $4,000 in the first 3 months of account opening. You can either redeem the points for $750 in gift cards or travel rewards at thankyou.com.
The Discover it Miles card is another good choice for those who want a flexible rewards program. You'll earn 1.5x miles on all purchases, and at the end of your first year, Discover will match all the miles you've earned. You can redeem your miles for travel purchases made with the card or use them for cash back through a direct deposit. It gives you the option to spend that money later on travel.
● Minimum credit score: 670 ● Minimum credit limit: $500 ● APR: 0% APR for the first 15 months. Post that, it will be between 16.74% - 27.74% ● Annual Fee: $0 ● Foreign Transaction Fees: 0%
Our Top 2 Picks 1) Chase Freedom Unlimited:
This is a one-card wallet, with high cashback rates on most spending. It also offers a 0% intro APR for balance transfers and big purchases. One of its standout features is the lack of minimum redemptions, allowing cardholders to redeem even small amounts of cash back (as little as $0.01). Plus, with no annual fee, this card can be a cost-effective way to earn rewards while building credit.
2) Discover It:
This is the best option if you are a student with a minimum credit limit of $500, this card provides some clarity for those who may not qualify for higher limits. On top of that, the card offers several great features, such as a $0 annual fee and 5% cash back on up to $1,500 spent in quarterly rotating categories (1% on all other purchases). Plus, if you happen to miss a payment, the card waives the late fee for your first offence.
How to Make a Wise Choice
● Opt for a card that matches its rewards with your expenses. ● Consider the value, spending requirements, and expiration dates of the sign-up bonus. ● Evaluate annual fee against received benefits ● Check for foreign transaction fees ● Look for a card with a lower interest rate ● Check credit score requirements before applying to avoid unnecessary inquiries
Quick Tips to Get The Best of Travel Rewards
● Sign-up bonus: Remember the specified timeframe and redeem before it expires ● Bonus categories: Use cards for purchases in categories that offer maximum bonus rewards ● Redeem rewards wisely: Read every redeemable option and get the best value ● Take advantage of travel perks: Use perks like airport lounge access or free checked bags ● Use multiple cards: Consider using multiple cards to maximize rewards in different categories While credit cards can be beneficial, it's essential to use them responsibly to avoid falling into debt. Ensure that your expenditure meets with what you afford to pay back each month. The healthy practice is to pay your balance in full, stay within your budget, and pay your bill on time. You can do so by setting up automatic payments and monitoring your credit score regularly. Using your credit card responsibly can help build credit while enjoying rewards. However, remember that high-interest rates, fees, and late payments can lead to debt and financial trouble. Please Note: Read the fine print before you apply. The travel rewards and benefits may vary with time.
Be the first to hear about our latest apps, features and financial tips.