The following is a Guest Post from Joshua from CNAFinance.
Credit Card Debt? You Don’t Have To Hire A Pro!
Credit card debt is something that many of us are dealing with. We’ve been through quite a bit just in the past few years! War and worldwide recession have caused many businesses to close up shop leaving several without work. This lead to an enormous increase in the use of credit cards in the average household. Now that we are starting to find work again, more and more of us are starting to work on becoming debt free. Finally, realizing financial stability.
In your search for debt freedom, you have probably come across several articles that have told you that debt consolidation or debt settlement are you best option and this or that company can do it all for you! The truth is, you can get out of debt on your own. All it takes is a bit of planning, smart decisions and hard work. Here are a few options that you can take advantage of without having to pay third parties:
Option #1: Credit Card Hardship Programs
One of the best options out there for those who are still facing financial hardships is credit card hardship programs. Although the overwhelming idea of lenders is that they are huge, evil corporations that care about nothing but profits. This isn’t exactly the case. Although profits are important, lenders have shown over the last several years that their communities are becoming more and more important to them. They have done so by opening financial hardship departments designed to help consumers dealing with financial hardships free of charge!
When you enter a credit card hardship program with your lender, it will most likely be a 60 month agreement. The lender will close your account and reduce your interest rate. You will also be set up on a constant payment much like a car payment. Therefore, you will pay less and your minimum payments will not fluctuate from month to month. Within 5 years, you are paid off and well on your way to financial stability!
How To Apply For Credit Card Hardship Programs
Step #1: Get Your Ducks In A Row: Preparation is key in any process. This is more important than ever when working with your debts. To get prepared to apply for a credit card hardship program, you will need to create a couple of list. The first list will be a list of your income sources and should include your salary and any other source of income you have with the exception of alimony and child support. The second list will be a list of your expenses and should include your rent/mortgage, credit card payments, auto loan payments, utilities, insurance payments, food, medical, child care and any other expenses that you pay on a month to month basis.
Step #2: Call Your Lender: Now, it’s time to start applying for your hardship program. Simply call the toll free customer service phone number on the back of your card. When the representative asks how they can help you, say something like “Hi, I’m calling because I am going through quite a bit financially. I know I owe you the balance but I am having an incredibly hard time paying according to the current agreement we have. Is there anyone I can talk to that might be able to help me arrange a more manageable agreement?”.
Step #3: Follow The Leader: At this point, you will most likely be transferred to the financial hardship or collections department within the bank. Simply answer all questions honestly and you might just be amazed at the level of help you receive.
Step #4: Wash And Repeat: Once you’re done with your first account, simply continue this process with each of your other accounts. You will find that 60% to 70% of lenders will be willing to help!
Option #2: Interest Rate Negotiations
If you are not currently dealing with a financial hardship but, you feel like your interest rates are too high on your credit cards, you may want to consider interest rate negotiations. Just like mom and pop stores, lenders rely on their faithful client base. If you have been a model customer, they may be willing to reduce your interest rates with a simple phone call. Here’s how to get it done:
Step #1: Get Ready Comes Before Get Set, Let’s Go: I know you are eager to give your lenders a call and get lower interest rates but, before you do that, you should get prepared. To do so, make a list of all of your credit cards. The list should include the balance, interest rate, lender name, account number and customer service phone number for each credit card that you have.
Step #2: Call The Lender With The Highest Interest Rate: Call the customer service phone number for the lender with the highest interest rate. When the representative asks you how they can help, say something like, “I was going through my credit card profile and noticed that you are currently charging me the highest interest rate out of all of my cards. I love this card but, with so many balance transfer offers out there, I can’t see myself paying such a high rate anymore. Is there any way you can help?”.
Step #3: Follow The Leader: Just like with credit card hardship programs, there are several different ways this conversation can go. Simply follow the leader and answer the questions honestly. If you qualify for a lower interest rate, you will most likely have one by the time you end the phone call.
Step #4: Wash And Repeat: Now, simply call down your list to the lowest interest rate following this same process. Generally 50% to 60% of lenders will be willing to lower rates for customers who have paid on time for the last 12 months.
Option #3: Transfer Your Balances
If you are not dealing with a financial hardship and your lenders are not willing to negotiate your interest rates, you do have 1 more option. You can transfer your balances to lower interest rate credit cards. These days, we have balance transfer credit cards that allow us to do that. However, before doing this, it’s important to do a proper comparison of the offers out there. Here are the steps to a good balance transfer credit card comparison:
Step #1: Make A List Of Offers That Beat Your Current Long Term Rates: Transferring a balance to a new credit card that has a higher interest rate than the one you are paying now is pointless. Therefore, start by combing the market for offers that have lower long term interest rates than the rates you are currently paying.
Step #2: Compare The Interest Rates: If you plan on carrying a balance from month to month on your new credit card, chances are, your interest rate will be the highest fee that you find yourself paying. Therefore, it’s important to compare the interest rates first. Remember, there are 4 different types of interest rates to compare and they are all equally important. They are the promotional, standard, cash advance and default interest rates.
Step #3: Compare The Fees: I wish I could tell you that interest rates were the only fees that you would pay on balance transfer credit cards. But, if I did, I’d be lying to you! Each different credit card offer will come with it’s own list of fees that will be charged if you decide to use the card. Therefore, before you apply for any credit card, balance transfer credit cards included, you should always take the time to read the rates and fees section of the terms and conditions and compare it to the rates and fees section of other offers on the market.
Step #4: Compare The Issuing Lenders: It is important to remember that when you open a new credit card, you are starting a financial relationship. One that may have a strong grip on your future financial stability. With that said, you want to make sure to start this relationship with a lender that you trust. If you don’t know the lender that provides the card you choose, you should do a bit of research to make sure that they are a trustworthy lender.
I know that credit card debt can be quite the burden. However, it is important for you to know that you do not have to pay someone thousands of dollars to help you pay it off! These options are all completely free do it yourself type options. If done properly, they can have the same or even a better effect than your standard credit card debt consolidation or credit card debt settlement program.
About The Author – Joshua Rodriguez
This article was written by Joshua Rodriguez. Joshua Rodriguez is the proud owner and founder of CNA Finance as well as an avid personal finance writer. This article was inspired by his most current series, “Balance Transfer Credit Cards – A 7 Step Guide To Understanding This Option”. Join the discussion about this article, Joshua’s series or any personal finance topic of your choice on Google+!