Having Trouble Paying Down Your Credit Card? Make Your Bank An Offer It Can’t Refuse

Attention all delinquent credit card holders! Now’s the best time to settle your bill. If the financial industry and the auto industry had their respective bailouts late last year, this could be the time for ordinary consumers to be given some leeway in their debts, particularly credit card bills.

With continued rise in the country’s unemployment rate, banks and credit card issuers are also seeing record-high default rates. Bank of America and Citigroup fared the worst last month, writing off 12.50% and 10.50% of their card loans respectively. Other banks which had to deal with increased credit card write-offs last months include American Express -10%, Capital One – 9.4%, Discover Financial – 8.9%, and JP Morgan Chase – 8.36%.

Because banks have come to realize that since unemployment and credit card defaults/ delinquencies will always go hand in hand, they would do well to cut their losses now and just take what they can. For consumers, this means that it’s possible for them to offer to pay much less than what they actually owe and the banks would willingly embrace this settlement.

In most cases, getting a good deal doesn’t even require a lengthy negotiation. It appears that bank front-liners and customer representatives have been given the power and most likely, the appropriate guidelines for them to decide on what would already constitute as an acceptable settlement for the bank.

Credit card companies however, do not openly confirm that this practice is getting to be the norm nowadays. Bank of America and American Express maintain that they are dealing with troubled accounts on a case to case basis. Other banks have no comment on the matter but the American Bankers Association (ABA) does acknowledge that reaching a settlement with a credit card customer is a process that banks are practicing more frequently today.

Consumer credit debt as of March 2009 is pegged to be at a staggering $939 billion, with 6.5% of that at least 30 days past due. As more banks are nearing the 10% mark in credit card write-offs, this would essentially translate to close to $100 billion in losses for the industry. It’s no wonder banks are willing to run with what they can get.

So the next time your bank representative calls and asks you when you can pay off your $5,000 credit card bill, try going for a $2,500 payment and have the bank consider the account fully paid. With the way things are going in the credit card industry, they just might say yes.

About the banks

 

American Express Bank, FSB

American Express Bank, FSB is an FDIC-insured bank that is a member of the American Express family. Our goal is to provide you with the same quality of service you have come to expect from American Express. In fact, customers don’t need to be an existing Cardmember to open a Personal Savings account. Featuring 24/7 account access via web or phone, Personal Savings from American Express offers competitive rates, simple products and FDIC insurance all under a trusted name.

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Capital One

Headquartered in McLean, Virginia, Capital One® offers a broad array of financial products and services to consumers, small businesses and commercial clients in the U.S., Canada and the UK.

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Discover Bank

Since 1911, Discover Bank has been providing superior banking products with service designed to help customers achieve their financial goals.

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Bank of America

Bank of America is one of the world's largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other. It operates in 32 states, the District of Columbia and 30 foreign countries.

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