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Your credit card company may have a settlement deal for you

Consumer Reports News: August 04, 2009 06:08 AM

As more people are having problems making their credit card payments or customers choose to walk away from large balances, credit card companies are deciding that it’s better to get something back from customers than nothing. They’re taking actions such as lowering interest rates, reducing monthly payments, eliminating fees or referring customers to a debt management program. And they’re often willing to do so for people who are just struggling to meet payments, not only customers that are already delinquent, or are “hardship” cases.

Keep in mind that accepting certain settlement deals could affect your credit score, so it’s worth asking the credit card company how it will report it to the credit bureaus. Your credit score will be affected differently depending on whether you pay in full or do a settlement. If the entire amount is placed into a debt management program and you pay off the loan, this does not negatively affect you credit. However, if you settle for less than the full balance owed, there is a detrimental impact on your credit. That impact, however, is not as bad as if you were to default.

Below is a wrap-up of what the major card issuers are offering. In many cases, the deals are being offered on a case-by-case basis, so call the customer service number on the back of your card to determine your eligibility.

•Capital One is offering cardholders delinquent on their accounts six months of no interest to catch up on their payments. This could include fee waivers, APR reductions, settlements, or payment plans.

•Bank of America is offering repayment periods of up to five years, and the rate could be in the single digits. In terms of other settlements, on a case-by-case basis, they also may settle for less than the full balance.

•Discover Card has offered programs to some existing cardmembers to consolidate debt into a fixed-rate installment loan through Discover Bank. They also have a range of single-digit APRs that they are temporarily offering to cardmembers demonstrating severe hardship.

•American Express will significantly lower monthly payments, which means a lowered interest rate (as low as 0%) as well as a lower monthly minimum payment. They’ll also waive fees, like late fees. All card members can apply, not just delinquent ones. Cardholders would get on a payment plan, and during this time (typically up to a year) they would not be able to use their card. When they complete the plan, they'd be able to use the card again.

•Chase will restructure loans to reduce interest rates, waive late and over-limit fees, and extend repayment terms through a variety of internal and external payment programs. Interest rate reductions can extend over nine to 60 months for small or large balances depending on the nature of the customer’s situation. The interest rate depends on the degree of financial distress, and Chase will go as low as 0% interest for customers in the deepest financial distress who still have the ability to meet restructured payments.

•Citi is offering debt consolidation, temporary forbearance, matching payments, settlements, interest rate reductions, and others. A recent letter a staffer here received offered up to $550 in statement credit to help lower his balance. For paying more than the minimum amount due (on time) for any of the next 4 billing periods, you can earn a statement credit equal to 20% of the amount paid beyond the minimum amount due. But, the card can’t be used until the statement credit is posted. Upon receiving the statement credit, your credit line will be decreased by the total amount paid over the minimum amount due, plus the amount of the statement credit.–Chris Fichera

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