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The Secret Art of Credit Negotiation

Okay, maybe “secret art” is a little grandiose. But, the fact is that many people don’t realize negotiation is even an option when it comes to applying for and working with credit. Others may have a vague idea that it’s possible, but have no idea how or why they might want to do it.
This article is for everyone who has ever borrowed money and felt like they were no longer in control of the situation.

The Myth

Huge credit card companies and other lending institutions appear to be these great, stalwart pillars of the economy. Surely, there’s no way little old you or I could get them to move an inch when it comes to the terms of the loan we’ve accepted, right?
Actually, no.

The Reality

In fact, credit card companies welcome negotiation when it’s handled the right way and for the right reasons.
You see, like any other business, credit card companies want to make a profit. Granted, one of the ways they do so is by collecting fees from customers. But, the fees they collect from retailers who sell goods and services to their cardholders is vastly more important in the grand scheme of things. While each cardholder may be worth a few hundred dollars in interest and fees over the course of a year, each retailer is worth millions.
However, retailers are only going to continue accepting a given credit card if they know a large number of consumers carry them. If hardly any of the store’s customers are carrying that card, paying for the privilege of accepting the card makes less sense.
The end result is simple: credit card companies are desperate to find new cardholders and retain the ones they have, and it’s a highly competitive business. So, even though they’re multi-billion dollar international corporations, they need YOU. And, they’re often more than willing to waive small fees and make concessions on debt payments if it means retaining you as a customer.
The hardest thing about negotiating with credit card companies is getting past your own reluctance. In fact, a 2017 survey conducted by found that 69 percent of those who asked their issuer for an interest rate reduction received it, and 82 percent were able to get their annual fee waived or reduced.

What can be negotiated?

While the axiom, “everything is negotiable” may be overstating the truth, there are a number of items you should consider discussing with your creditors in order to improve your financial situation.
Here are some of the most common items that credit card companies and other lenders are willing to negotiate:
  • Interest rates
  • Due dates
  • Fees
  • Credit limit
  • Minimum payment
  • Total debt

It’s important to remember, of course, that the definition of “negotiation” involves a little give and take. It’s not reasonable to expect your credit card company to adjust all of these factors for your convenience, so it pays to head into the discussion with a clear understanding of what you’re trying to accomplish and the best way to go about it.

Why negotiate?

Each of the above credit factors can be valuable to negotiate depending on your personal circumstances. Likewise, the lender or credit card company will be more or less willing to negotiate each point based on various circumstances.

Why negotiate interest rates?

If you can convince your lender to lower your interest rates, it can mean a lower monthly payment AND a much smaller overall cost for the debt you’ve incurred. Plus, if the new rate applies to future purchases as well, it becomes a permanent savings on all the debt you incur going forward.
From the lender’s perspective, this could be a tough sell because you’re directly cutting into their profit margin. However, they also realize that other lenders are constantly trying to earn your business and low interest rates is one of the most common ways they go about it. 

Why negotiate due dates?

For many of us, “living paycheck to paycheck” is more than just a figure of speech. Depending on what unexpected events have come up in recent weeks, having to cover a hefty credit card bill on the 20th may be nearly impossible, while covering the same bill on the 30th — once the next paycheck has made it to our account — is much more doable.
Adjusting a due date is one of the items that’s usually easiest for a lender to adjust. They would much rather wait a few extra days for a payment they’re more likely to get than have to resign themselves (and you) to perpetually late payments.

Why negotiate fees?

Much like interest rates, assorted fees like a credit card’s annual fee or late payment fee are natural targets for negotiation because it saves us money immediately. Unlike interest, however, it’s highly unlikely you’ll be able to justify permanently eliminating a given fee. These are best handled on a case-by-case basis.
This is another competitive issue for lenders: there’s always going to be another company out there who charges less or doesn’t charge a particular fee at all. So, it’s usually in their best interest to occasionally waive fees rather than draw a hard line and push you toward the competition.

Why negotiate credit limit?

An increased credit limit offers two significant benefits to you (assuming you’re financially responsible):
  1. It boosts your spending power and flexibility to use credit to your benefit.
  2. It helps boost your credit score by increasing your credit utilization ratio.
An important point to remember: the credit card company will need to perform a hard inquiry on your credit report to determine if they can raise your credit limit, and that will have a slightly negative impact on your score. Too many hard inquiries in a short period can add up.
From the lender’s perspective — again, assuming you’re financially responsible — the more credit you have available, the more you can potentially use. This is really a win-win across the board.

Why negotiate the minimum payment?

At times, emergencies and temporary problems put an unexpected strain on an otherwise healthy budget. If and when that happens, it can be very helpful to negotiate a temporary lowering of the minimum payment your credit card company or lender demands each month. It’s highly unlikely you’ll be able to get this lowered permanently, and you probably wouldn’t even want to, since the monthly payment is directly tied to the long-term cost of the money you’ve borrowed. But, for situations that are likely to last just a month or two, it can be an excellent stopgap measure.
Your lender would much rather work with you for a month or two than end up seeing the entire account spiral into default if it could have been easily avoided. They may be willing to defer payments for a few months (meaning you owe nothing during that period) or accept a small good faith payment (perhaps $1) to keep your payment record consistent.

Why negotiate the total debt?

Debt settlement and debt forgiveness may seem like “the holy grail” of credit negotiation, but in most cases they’re actually options you should try to avoid unless absolutely necessary. Unlike the other factors discussed so far, if you’re trying to convince a lender to make some or all of the debt you owe them disappear, it’s going to have a detrimental effect on your credit score. In dire circumstances, though, your credit score may need to take a hit either way. In that case, negotiating for a lower overall debt can save you thousands.
For the lender, “something is better than nothing” applies here. While no lender is going to be eager to write off a chunk of debt they are legitimately owed, it’s far better for them to do that and get the balance from you than to end up losing all of it in a bankruptcy settlement.

Credit negotiation best practices

Common sense applies when it comes to credit negotiation best practice:
  • Don’t procrastinate. Don’t begin negotiations when you’re drowning in debt and desperate for relief. Get ahead of problems if possible, so you can negotiate while still in good standing with the lender.
  • Make a good first impression. Check your credit report first to make sure there are no outstanding issues or errors that could get in the way of a favorable outcome. If possible, pay the current bill before calling.
  • Prepare ahead. Gather all the facts and documentation you need to tell your story and be prepared to share anything the company needs to support your requests. Be ready to take detailed notes as well, and to follow up as needed.
  • Be consistent. Be clear about what you’re requesting and why, then stick to that narrative consistently, even if you need to speak to several people or make more than one call.
  • Choose your battles. You can’t expect a perfect outcome across the board every time. Prioritize your needs and be willing to sacrifice less important requests.
  • Choose your battlefield. Deal with the customer service representative for minor adjustments (like a due date or isolated fee) but speak to a manager for more significant requests. The idea is not to go over anyone’s head, it’s to make sure the person you’re dealing with has the authority to make the change you’re requesting.
  • Be nice. Always remain calm, polite, and reasonable. The company’s representatives are people too, and they’re just doing their job. Respect and kindness go a long way.
  • Be persistent. It may take several attempts before you plead your case in the right way to the right person. Regardless of how many times you’re put on hold or transferred, don’t forget to be nice.
So, there you have the “secret art” of credit negotiation.
As you can see, it’s really not all that mysterious. But, it is powerful. Especially for savvy consumers like you: willing and able to take the necessary action to maintain control of your finances and work with not for — lenders and credit card companies.

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