Tips for negotiating reductions on credit card balances

It is possible for distressed borrowers to negotiate reductions on credit card balances, although it is not always easy.  There are some steps that can be taken to negotiate a reduction.

Before starting negotiating with credit card providers, consumers should be clear what the worst outcome can be.  Although the consumer may already have a poor credit rating, it may be that the credit rating would be high before asking for a cut in the balance.  Credit ratings do suffer when a borrower shows that they are in trouble, even before any arrangement.  Balances may also be recalled.  Bankruptcy may also be an option for larger debts.

False alarms can mean a reduction in available credit (and worse terms on which the credit is available).  Negotiations should only start if there is a genuine financial problem, or there is likely to be a financial problem. There are more options at earlier stages and the steps that should be taken as soon as a problem looks likely should be steps such as budgeting and contacting debt reduction companies.

Draw up a balance sheet and budget should be done before going to the credit card companies or a debt reduction company so that the situation is clear.

Debt reduction companies should be seriously considered.  Credit card providers have specialist negotiators on the staff and standardized procedures.  Good credit reduction companies are prepared for these.  Check government or consumer listings for reputable credit reduction companies.  Do not pay for a debt reduction up front.

Credit card providers rarely give the best offers up front.  Consumers should be prepared to turn down the first offer, especially if the offer is unrealistic.

Credit card companies are keenly aware that they are not the only debt that is owed, and if a borrower is driven to bankruptcy or some general arrangement then the card company may find itself in a worse position than if they had negotiated.  Be aware of this and be prepared to play on this concern.

If there is also a lot of secured debt, for example mortgages (particularly those in negative equity) or auto loans, these debts will often be paid in preference to credit card debts. Credit card companies know this.  It can be an advantage to be clear from the outset that these secured debts are owed.

There are options to quickly repair credit ratings.  These include secured credit cards.  Consumers should investigate these options before losing a good credit rating and be prepared to exercise them quickly after a downgrading in the credit rating.