Advice On How To Repay Your Credit Card Debt

by blackberrychic

posted on 10/12/2009

In the economy today, many people are without jobs and money. Some have lost their houses due to the inability to pay the mortgage. As with any economic recession, the luxuries in life have to be replaced with the practical. Unfortunately, the costs of practicality can lead to defaulting on credit card debt, loans, and other financial affairs.

Over half the population in the United States owns two or more credit cards. Because of the economic downturn in 2008 through the present, approximately twenty-four million people had their credit cards closed or the amount reduced. Credit companies, eager to make back the money that they had lent, imposed stricter rules about repayment and higher late fees. For someone who already has difficulty in repayment, a thirty dollar late fee (multiplied by the amount of cards in his or her possession) puts stress on an already strained financial situation.

What to do

The most important thing to do is to contact your credit card companies. Leaving your debts unpaid, and with no history of trying to rectify the situation, means that the companies are less sympathetic and more unwilling to understand your difficulties. Remember, the customer service associates who work for the companies have been impacted in some way by the economy as well.

What to say

The most difficult thing is explaining why you are having difficulty paying back your debt- without sounding angry or upset. Financial management is one of the main stresses in our lives, and a conversation can turn heated in less than a minute. Calmly and patiently explain that you understand you have an obligation to the credit card company, but that due to financial hardship you are unable to accommodate the repayment amount specified.
In many cases, the monthly payment is a percentage of the total amount due. For example, on a repayment of five percent, a four thousand dollar debt would result in an amount of two hundred dollars a month. Many credit card companies figure on the amount of income you list and the amount owed in total, and then average a repayment rate based on that figure.
Debt collectors never like hearing that you can't pay them back; however, in this case, the best thing to do is state your plan for repayment. You have to remember that the companies do not keep a list of all your household expenses, or any unexpected bills that you accrue, and therefore will not automatically lower your monthly payment for you. You will need to explain to them the precise nature of your individual hardship, and not get frustrated if you don't hear what you want to by the first phone call. Most often, the customer service representative will need to get approval from a supervisor, and there will be back and forth phone calls for a few weeks.
Payment plans are usually offered by credit card companies as a way of making a payment manageable for the payee. Sometimes, the payment plans are still unrealistic, and that is when you need to work out a custom plan instead. Many companies have a limit that they will go to; the more you keep in contact with them, to try and work out something agreeable for both sides, the lower that limit will be. For example, when my husband had three credit cards totaling twenty-seven thousand dollars from Bank of America, we ended up paying them all off for a total of three hundred and fifty dollars a month, for a total of approximately four thousand dollars over a span of ten or eleven months. He had been unemployed for that year, due to the company he worked for closing, and I had just had my second child who was born prematurely and spent nine weeks in the hospital. We called up the bank and outlined our plan.

Repayment

There are a couple options to a repayment plan. The first option is for a lower rate, for the entire debt. The second option is paying in lump sums, spaced out with a month or two in between each payment. The third option is a settlement arrangement.
The pros and cons to each repayment options vary. With the first, you pay less per month but end up still paying the whole amount. The second option you end up paying more per month, but with a slight grace period in between, and the third option reduces the total debt owed, with a monthly payment plan based on that amount. The impact on your credit rating varies as well with each. Whichever way you go, repayment of a debt is always a good thing.
Many debt collectors will offer low rates either by phone, e-mail, or regular postal mail. All will have a toll free number, or local number that you can call to speak to someone about repayment.
Remember, in the repayment period you will need to budget as well. Seek out the advice of a financial planner or an auditor, who can fully assess your financial situation and give you the best advice possible on how to continue in the future.

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