Financial Fitness by Jainie Fitness

Negotiating Credit Card Debt
Hey everyone! Hope you all had a fantastic week! Last time I talked about why you should save your money, but I know that sometimes certain things can get in the way of doing that. A common culprit is credit card debt. If you can't make more than the minimum payment, watching that interest pile up is about as fun as running through poison ivy in your birthday suit. If you have a lot of credit card debt holding you back, try some of the steps below. It may seem overwhelming but just remember that every marathon starts with a single step.

Credit Card Debt Settlement
When settling credit card debt, what you’re trying to do is typically this: you call your creditors and offer to pay off part of your debt in exchange for them forgiving the difference. For example, if you owe $10,000, you can offer to pay $6,000; if your creditors agree to it, the remaining $4,000 is written off their books. Every issuer has their own policy when it comes to settling debt and the terms that you get will vary, yet most of them will try and help you.
Why? Because if you’re trying to negotiate a settlement, that usually says you’re near the breaking point and there’s a strong chance that soon they won’t be receiving any money from you. It would be even worse if you had to file for bankruptcy, and since credit card debt is unsecured, they’d be guaranteed not to receive anything at all. So the logic behind accepting a settlement that’s lower than what you owe them is that it’s better to get a percentage of something than 100% of nothing.

There are two drawbacks to settling your credit card debt, though. First of all, when you settle, your creditors expect to get paid right then and there. What this means is that you can’t ask for a settlement if you don’t have the money ready to make your lump sum payment. This option is best when you have savings or some other way of coming up with the necessary payment. The second drawback is one that most people don’t know, and are shocked when it hits them: the portion of your debt that is forgiven is treated as regular income, and you will have to pay tax on it.

Negotiating Better Payment Terms
If settling your credit card debt is not an option (and really, not many people have that luxury), you can try and negotiate better payment terms. If you have been a good customer, paying your bill on time with very few late payments, you should not have any problems negotiating a lower interest rate. This will lower your monthly payment. Even if you’ve been unable to keep up your payments, it’s worth a phone call to see if there’s anything that can be done about it. You won’t know until you try, plus it’s free to ask.

You can request that the fees charged to your account be waived, especially the late payment fees. While some companies will refuse to waive them, others might reconsider.
You also have the option of negotiating a payment plan, although the way this works with most companies is kind of wonky. If you have been making your payments on time, most of the time they will refuse to negotiate a payment plan with you (go figure). On the other hand, if your account shows that you’re several payments late and are in seriously bad financial shape, you’ll find that they’ll be much more willing to arrange a repayment plan that suits you better. Once again, it’s better to receive some money over time than no money at all.

I hope that some of these tips can be applied to your own financial fitness strategy. What other obstacles are in your way when it comes to saving your money? If you or anyone you know needs help you can always feel free to jump over to the forums. I'm always over there, and together we can make the first step of your marathon an easy one.

The mint makes the money first, it's up to you to make it last!

-Jainie-