Bankruptcy

Negotiate to reduce Credit Card Interest Rate

By Attorney Goldstein

The Credit Card Act has provided a great deal of added protection for consumers in the use of credit cards and the manor in which banks can market to its customers. However, one area that was not addressed was limiting the rate that can be charged after proper notice is provided to existing customers. As a result, many consumers have found that just trying to stay current on their credit card payments is very difficult, especially when you try to pay back the amount that you charge each month. The reason for this is that the past debt with its interest payments tends to increase each month through negative amortization.

There are a number of ways to reduce your inertest rates. However, one way that will work very well for those high rate cards, which consumers typically do not use any longer, but do carry significant balances is to negotiate with your credit card company on the rate based upon some consideration the consumer can provide. For example, you may want to propose to not use the card any longer, but just pay back the principal and interest currently owed to the creditor. In consideration for that, ask if the credit card company will reduce the interest rate. This in affect will shut off your credit card, but at the same time, allow you to pay the debt down.

The key to negotiating to pay and not use the card is to not harm your credit rating or FICO Score. The reason being, you do not want other creditors to reduce your limits or raise your interest rates based upon a reduction in your credit score. The question then begs to be asked, how will such an arrangement be reported on your credit report? It is imperative that when negotiating with the Credit Card Company, you require them to continue to report your account as open and current. This type of negotiation is not a debt settlement, and you are not proposing to pay any less then 100% of the unsecured balance. All that is happening is the Credit Card Company can take solace in knowing that the consumer poses no additional risk to incur fees that can not be paid back

This blog was originally posted on Consumer Debt Radio site.

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Full post as published by Bankruptcy Articles & Blog on September 27, 2010 (boomark / email).