If you suddenly lost your job or your income dropped and you fell into hardship and can no longer pay your credit card bill then most banks offer some type of hardship program you can join. The banks would rather you pay something instead of nothing. That’s why they are usually ready to work with you.
One of the types of hardship programs offered is the option to reduce your interest rate to a much more feasible rate and also provide you with better payment terms.
But this does not come with no consequences. In this post, let’s discuss it in detail.
How do I negotiate my interest rate?
Call the bank and ask! Some banks, like Citi and Discover, are easy to work with. Others will require you to do a little homework on how to ask for it.
- Explain your hardship and why you need your interest rate lowered in order to continue making payments
- Try to negotiate with banks that you already have their cards for a long time
- Make sure to point out your perfect payment history
- Reference to the rep to look into what the bank offers regarding hardship programs
There are also debt relief organizations that offer debt management plans. These organizations usually have pre-negotiated interest rate deductions for anyone joining their plan.
Some banks will require that you join one of these debt relief organizations in order to get your interest rate lowered. However, be careful – there are plenty of scammers out there. Make sure to only use an organization or company you trust.
Here is where you can find one of these programs:
Or you can email [email protected] for a recommendation.
Now let’s discuss some of the risks involved.
Risk to credit score
If all you did was just negotiate your interest rate then your credit score will not be affected. Just be very careful not to confuse this with a payment plan on which you pay less than what you owe. This will definitely YES affect your credit score.
To give you a quick hint so you don’t confuse them. An agreement that is only going forward – that from now on you will be paying less interest, such an agreement does not affect your credit score. But an agreement for which you do not have to pay the full balance, money that you already owe, such agreements usually do affect your credit score.
Credit cards can get closed
When joining any type of hardship program then usually you can expect your credit cards from that bank to be shut down. If you’re able to lower your interest rates without joining a hardship program then good. But if the bank requires you to join their hardship program then that will usually involve account closures.
Getting declined for new cards
When joining a hardship program you can expect not to be able to get approved by that bank for a new credit card for at least 12 months after exiting the program. This only affects credit cards from that bank, not other banks. So for example, when joining the Amex hardship program you might have an issue getting approved for an Amex card but you will not have an issue getting approved for Citi cards, etc.
(Sometimes) Rather apply for a intro 0% APR balance transfer card
If you’ve been following me long enough you probably already know that I recommend you rather get yourself an intro 0% APR card card for up to 21 months interest-free. If you are able to get approved for such a card then that is a far better option then joining any of these hardship programs. You can find a full list of 0% APR balance transfer offers currently available here. Or learn more about how balance transfers work here.
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