Credit Card Debt: How to Decrease Your APR, Eliminate Fees and Avoid Bankruptcy

Are you in a major financial bind due to credit cards, medical bills, insurance, rent, utilities, and/or student loans? Before you file for bankruptcy, make sure you’ve tried every sort of tactic you could to support yourself and/or family. If you have and the money jar is just getting lighter and lighter, you might want to explore the option. However, doing so is an enormous decision, for a lot of negative baggage comes with it. I would hesitate to recommend anyone to do it; I am convinced that if one puts enough effort in, slowly but surely they can pick themselves back up.

Below are some facts you need to consider when facing this financial crisis:

The first thing you should realize and accept is that many companies for credit cards, medical, loans, etc are really obliged to work out some sort of deal with you. The hardest part is admitting you are in serious trouble and even worse is confronting others with this helpless truth. But you must understand that you are nowhere near alone in this. Creditors bombard thousands, millions of people with delinquent account invoices each day. How else would so many of these bureaus be in business? They are used to people in your position and do not judge.

Once you’ve swallowed your pride, pick up the phone and call your credit card company or whoever is most relevant to your particular bill situation. When you call, be especially polite, thankful and humble for you can’t ask for a favor with an angry attitude. So psych yourself up and call the customer service 800 number on the back of your card or statement. Then you need to state your needs up front.

The name of the program you want to ideally get signed up for is called a hardship plan by most common credit card companies. When you ask about it, you will have more credibility if you “aren’t real sure what it entails but read something about the possibility of VISA (or whoever) working together with you to pay off the bill.” There are very strict requirements about who is eligible since this plan is ideal and even shockingly considerate for people struggling with finances. So the rep will likely ask you why you can’t pay it. Have an explanation ready. Your answer pretty much makes or breaks the deal. So make it good. The most common reason individuals need this option, for example, is because of a disability that has kept them out of work. Stress that you have little or no income for whatever reason you can legitimately come up with.

Usually, then, the rep will get extensive information from you about your financial state and then inform you if you are eligible. Note that this is kind of a long process. If you’ve missed several bills in a row, you are already past the front door, but you do really need to play up the poverty factor. If the rep thinks you’d be a candidate for this program, he or she will transfer you to a different department where someone will come on the line and explain to you the benefits of this option. You should have a pen handy.

All companies are different but the benefits of the hardship status usually consist of an enormous drop to a very low APR (often around 5.7% in comparison to your current 29.9%) that is fixed for the amount of time you are in hardship mode. They will also likely set you up with a no fees account to eliminate the perpetual increase of your bill due to nothing but interest, late fees and over the credit limit fees. The rep will give you a date, that is the same number during each month for you to mark on your calendar to pay a significantly reduced minimum due. Phone payment is encouraged and for hardship account holders, the typical pay by phone fee may be waived.

The program is great as long as you keep on top of it. A common question is “Will it look bad on my credit?” and the answer is no. If anything it will help to slowly repair it, as now you can handle paying the minimum due each month because it’s not as intimidating as before.

You must also pay close attention to the representative regarding how long this will last. Depending on your “issue”, they usually implement this for three to six months. When they ask you how long you would need this option, estimate about six months and you’ll likely get that. And if you need more time than that, you just have to call in the fifth month (varies among companies) and ask for an extension.

If it sounds complicated, don’t worry, they will walk you through the process. But it you still might want to jot a couple notes down to have as a quick reference in mid-conversation so you don’t forget anything. It can’t hurt. Good luck!