Kim Kiyosaki on KITV 4 / ABC News
NEW YORK (CNNMoney.com) — Rising unemployment is pushing strapped U.S. borrowers over the edge, with delinquencies and balances on delinquent credit cards surging — that’s according to an industry report. Here’s your step-by-step guide on what to do if you can’t afford your credit card payments.
1. Contact your lender
Let’s say you’ve lost your job, or are looking at a steep medical bill, and worried you won’t be able to make your credit card payment.
Make sure you call your lender and explain the situation. The sooner you contact them, the more willing they may be to work with you.
More and more credit card companies are willing to negotiate. Realize that they’re not being charitable — they’re just trying to get what they can out of you.
So, what can you ask for? If you can make some sort of monthly payment, ask your issuer to lower your rate and possibly waive your fees. Also ask to work out a payment plan.
If the first person you speak with can’t help lower your rate or make adjustments to your account, ask to speak with a supervisor. Persistence may be necessary to find the person who can or will help you.
Document all conversations, including the name and title of the person you spoke with, date, time and results.
Go to helpwithmycredit.org — a Web site operated by credit card companies for more information on dealing with debt issues.
2. Get your debt forgiven
Increasingly, credit card issuers are accepting dimes, if not pennies, on the dollar as payment in full. But if you’re striving to get a debt forgiven, don’t expect a sweetheart deal.
Generally you have to meet certain criteria. For example, most cardholders have to be delinquent for at least 90 days and — usually — your credit report needs to show that missing payments isn’t a common occurrence. But that doesn’t mean that once your debt is settled, there are no consequences.
Closing an account due to settlement is bad for your credit score and will affect your score for several years. If the forgiven debt is more than $600, you must pay income taxes on that amount.
If you’re looking for guidance on negotiating with your credit card company, go to the National Foundation for Credit Counselors at NFCC.org.
Don’t waste your time with third party debt settlement companies. These companies charge you fees for a service you can do yourself — for free.
3. Prioritize your payments
If you’re having trouble making your monthly bills, it’s time to prioritize.
First, look at your immediate needs. Pay your mortgage or rent bill, keep making payments to your utility company and keep food on your table.
Then start to think about paying down your credit card balances. Find out which card has the highest interest rate and pay that one off quickly while making modest payments to your other credit cards.
Remember that credit card debt is unsecured debt — meaning that there’s not much that the credit card company can take away from you if you’re delinquent. You should always strive to pay off your debts. And stop using your credit cards until you pay off your current balances.
– CNN’s Jen Haley contributed to this article.
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Struggling with credit card debt?
Kim Kiyosaki (wife of Robert of Rich Dad Poor Dad fame) shares an interesting insight about what she calls: 4 kinds of people, grouping them by their mantras:
- I must be right — people who love to be validated and proven correct.
- I must be comfortable — people who like settling in their comfort zones and not push boundaries.
- I must be liked — people who live to please others and patronize.
- I must win — people who will do anything to succeed.
Although doubtless there are more archetypes than Kiyosaki claims (depending on whatever typology you subscribe to), the thing I find interesting about the 4 types above is how they would react and utilize critical thinking.
- Critical thinking seeks to clarify, not simply validate.
- It is often uncomfortable and involves challenging the status quo.
- It is not patronizing, and is often deprecating.
- It seeks to achieve its end goals.
Of the 4 types above, only those who seek to win would push criticism to its limit.
Kim says know who you’re dealing with and that will bring you success. In critical thinking it’s the same: it’s important to know who your talking to, who your audience is, and who you’re criticizing.
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4 Types Of People
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It was a stinging rebuke. I took it on the chin last weekend as I waited in line for a ride with my child at an amusement park in Toronto.
 ”My dad has a BlackBerry,” the little monster gloated in front of my own boy as he looked at my bottom-of-the-line cellphone.
 I hate having a cellphone but my spouse says it is a must in case of emergencies. (I’m not sure how my mother ever got a hold of my father in emergencies back in the 1970s. He didn’t even have a walkie-talkie).
I tried to explain to the young lad that I spend as little money as possible on my cellphone, opting for a $50 piece of junk that lets me pay per call — something I don’t do much of usually.
“Don’t you know you can get a BlackBerry for free,” he said, looking at me as if I am the dumbest adult on the planet.
Of course, I don’t expect a child to understand that signing up for a “free” cellphone means a commitment to three years of payments that could easily add up to more than five times the cost of the phone that you got for “free.”
Adults understand the deal. They just don’t care. Everybody wants a free BlackBerry or next-to-nothing iPhone today if they can pay for it tomorrow.
The enormous debt levels in Canada, now 140% of personal disposable income, do not even include all the financial commitments and contracts we have from cellphones to car leases, says Doug Porter, deputy chief economist with Bank of Montreal.
“Most of the traditional measures are the classic borrowing on credit cards, consumer loans and mortgages,” says Mr. Porter. “In the early 1990s, debt was underestimated because it did not take into account the leasing of cars.”
Terry Leon, chief executive of Leon’s Furniture Ltd., proudly claims his company pioneered the whole “do not pay until” programs, which allow consumers to walk out of stores without putting up one cent.
“We are going on as long as 100 weeks in honour of our 100th anniversary,” says Mr. Leon, referring to the fact consumers can now buy something in his store and not pay for almost two years.
There is a difference from most debt with his store because Leon’s does not charge interest. That $1,500 couch is the same price whether you pay for it in full the day you buy it or wait the full 100 weeks before making your full payment.
On its anniversary, more than half of Leon’s customers decided not to pay that day. That’s not hard to understand. Why would you empty your pockets when you don’t have to?
Credit, or temptation, is still everywhere. Even after what has been described as one of worst recessions in history, I’m still being offered financing for everything from fixing my smile to buying a new television set.
I get an offer for a new credit card about once a week and the list of things I can charge on that credit card expands every day. If I was worried about that monthly cellphone commitment, all I have to do it is tack it on my credit card.
I was incredulous when a friend told me he was able to gamble on horses at the racetrack with his credit card. “It just comes up as a charge like it would if I bought something at the Bay,” he told me.
Not that I doubt my friend, but I went online to see if I could set up a gambling account with my credit card. It takes about three clicks, once you plug in all your information.
Scott Hannah is president of the Vancouver-based Credit Counselling Society, a non-profit group that helps consumers find their way out of debt. He notes a strong surge in demand for its services. “Compared to a year ago, the demand for our services is up 118% from last September,” says Mr. Hannah.
With debt levels as high as they are today, consumers have little cushion to deal with any downturn in the economy. “They just can’t handle any bumps in the road,” says Mr. Hannah.
Those bumps hurt a lot more when you have no cushion or savings.
If you’re going to be in debt, why not look for the best deal? The Financial Consumer Agency of Canada has a great website (fcac-acfc.gc.ca) that compares credit card benefits.
Credit:
Debt becomes us
