Question:
Dear Steve,
~$60k credit card debt with BofA
700 credit score
Never been late on any payments of anything
What options do I have to negotiate credit card debt right now. I was told that I could get BofA to go down to 1% APR on my remaining balances. As long as all of my other credit cards are paid off or closed.
Thank you in advance!
Kevin
Answer:
Dear Kevin,
Negotiating with banks is a bit of a game. Banks are made up of many different departments that each have different plans, options, and opportunities to deal with debt.
For example, Bank of America has a unit that just deals with credit counseling accounts. The first stage of collections doesn’t have the same tools that the next stage does.
I’m not sure why you’d want to rush to close any account that might be helping to boost your credit score. Always a smart idea to leave open your oldest cards to give you a long history on your credit report.
It’snot clear if you are interested in getting your interest rate lowered or trying to settle your accounts for less.
If your credit score is the most important consideration then paying at least your minimum payment each month and keeping your balances down below 35% of your credit limit is a good thing to do.
If you just want a lower interest rate, you can always call Bank of America and ask. They can say no and you have no control over that.
If you want to see what your payment might be with a non-profit credit counseling program, contact an agent to find out. Your account may be closed and your payment might be reduced, but that’s not a given.
What is clear is you need to gather some more information before you rush to make a decision.
When thinking about how you want to deal with your debt you should not only factor in the debt you have today but also incorporate what your financial plans are for the future. Do you want to maximize retirement savings so you will retire with more money or do you want to spend years repaying the current debt? You also need to think about your current emergency fund savings and how to avoid new expenses landing back on credit.
You also have to consider how much credit score pain you are willing to take if that means cutting your debt in half or eliminating it completely in about 90 days.
I’m a giant fan of getting opinions and facts before you leap. People I trust to give you good advice are Damon Day and Michael Bovee. They are both exceptional debt coaches who can look at your overall situation and get you pointed in the right direction given your current and future goals.
Please update me in the comments below and let me know what you decide to do.
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Yes, this makes sense!
Never been late on any payment of anything!!
Yet, the 0% intro rate for 2 years on credit cards is quite the journey…
Fortunately I will be able to pay off my cc’s with a year of high interest debt…
Yet, allowing banks to go from 0% intro rate to 15% or even 20%! with a once in a lifetime COVID-19 $$$ shock + ~0% Fed rates they are paying is eye opening…the banking system is quite the octopus of $$$
Hi Kevin,
You can call Bank of America and request the interest rate reduction while current on your payments, but be ready to hear the word no.
If, however, you call when you are a few days late, you may be asked a bunch of qualifying questions. How you answer those questions will often determine if you are given a zero percent hardship plan where you pay the account off over no more than 60 months.
Answering those income and expense questions is important to prepare for. I cover this in more detail here: http://consumerrecoverynetwork.com/hardship-payment-plans/
You basically risk a $38 dollar late fee. Just be sure to figure this out with them before you go 30 days late.
Thank you for the response!
Actually my goal is to lower the interest rate for my 4 BofA cc’s down to 1% as I was told is possible.
Last year a debt counselor told me to do this:
1. Pay off all my non BofA cc’s (~$20k). I will not close them as you explained (which can lower my credit score).
2. Next close my 4 BofA cc accounts (I have 4 Chase cc’s & 4 with other banks to maintain my credit).
3. Then BofA will let me pay off the $60k debt@1% instead of 10-18% as now!
Have you heard of this?
They told me Chase will only go down to 10%, while BofA offers 1%.
Which works best for me since there is 70% of my debt!
Asked question.
Answered.