Once you've racked up a bunch of credit card debt, getting rid
of it can be the toughest financial challenge you've ever faced.
Yet what many people don't realize is that they can successfully
negotiate credit card debt away, often with only minimal effort.
Below, we'll give you some negotiating tips, but first, let's
look at why you actually have more leverage to negotiate with
card companies than you might think.
The dog-eat-dog world of credit cards
When it's you against a banking behemoth, you might think you're
doomed to get the short end of the stick. But the key to
successfully negotiating with your bank is to understand that
your debt is their asset, and it's valuable to them to keep it
rather than giving it up.
In fact, credit card debt is so valuable to card issuers that
they fight each other constantly for your business. At various
points during the past year, for instance,
) , and
Bank of America
) have all given new cardholders offers that include
bonuses worth hundreds of dollars
in cash or airline miles just to sign up.
With card companies paying that much just to get new customers
-- some of whom may never actually incur interest charges at all
-- they should be willing to pay
to retain your business if you have an outstanding balance that
you're paying interest on. After all, if you don't pay off your
credit card debt every month, you're among the most lucrative
class of customers from a bank's perspective.
Opening the negotiation
The first step to successfully negotiating your credit card debt
is to do your homework. If you have multiple credit cards and one
of them is offering you an opportunity to transfer a balance at a
low rate, make sure you understand exactly how that deal works.
If you don't, look around at various offers on the Internet or in
print advertisements to find out about offers that you may
Once you have an idea of what you can expect from competitors,
call up the customer service phone number on the back of your
credit card. Give the customer service representative who answers
a simple description of the problem: that you've seen a competing
financial institution offering the same type of credit card with
a more favorable interest rate, and you'll have no choice but to
transfer your balances to that competitor if your current bank
can't match the lower rate. Here's a
helpful script you can use
Sometimes, the rep will be able to give you a better deal on
the spot. Other times, you may get a scripted response, in which
case you can ask to speak to a supervisor who may have more power
to negotiate with you, or you can just call back at a later date
hoping to get a more agreeable rep who'll do more to help
You can also negotiate for more than just a rate decrease. For
instance, if you're truly in over your head, you can sometimes
get your card company to write off a portion of your credit card
debt in exchange for a partial payment upfront. It'll take a lot
more than just a phone call, but under certain circumstances, you
may be able to get your bank to make a big part of your
outstanding balance disappear.
When your debt is already out of control, it's hard to build up
the confidence you need to stand up to your bank. But once you
realize just how interested your bank should be to keep your
business, you'll realize just how much leverage you have to
negotiate your credit card debt down to a more manageable level.
And since the worst that can happen is that your bank will say
no, there's nothing to lose and everything to gain.
When you realize how lucrative credit cards are for banks,
you'll want to profit from them yourself by investing in the
banks that issue them. Bank of America is a huge card issuer and
has a lot of profit potential, but it will have to overcome some
roadblocks in order to succeed. Learn all about those pros and
cons in the
Fool's premium report on Bank of America
, in which our top banking analysts look at prospects for the
and get your report today.
Fool contributor Dan Caplinger successfully negotiated debt
reductions for several clients in his law firm days. You can
follow him on Twitter @DanCaplinger. He owns warrants on JPMorgan
Chase. The Motley Fool owns shares of Bank of America, Citigroup,
and JPMorgan Chase. Motley Fool newsletter services have
recommended writing a covered strangle position in American
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