Should I call my CC company to work something out if I recently became unemployed?

October 21, 2009 1:28 PM

I recently (the 12th) was laid off, is it worthwhile calling credit card companies to suspend payments or work out a lower interest rates until I'm employed again? I have a large amount of debt from an ill-fated freelance photography "gig" and general overspending.

I never signed up for those credit monitoring/in-case-of-emergency programs for $10 a month (wish I had). Do CC companies work with people, or will this simply cause the companies I call and the companies they work with to slash my available credit?

Thanks guys.....

posted by anonymous to work & money (5 comments total)

[Used to work for a credit card company.]

First and foremost: If you convince them to lower the interest rate/lower the payments, they're going to effectively close out the card. They might actually close the account, they might put you at a credit limit of $0, or they might simply put a purchase freeze on it, but you will almost certainly not be able to use the card. If this is a dealbreaker for you, I'd suggest against even calling them.

Additionally, this will damage your credit. It won't hurt as much as just not paying, but it will hurt. That said, unless you really believe that you're going to get a job in the near future, trying to make a deal with them is probably the best option.

All of that said, most credit card companies are willing to work with you. If the closed account/credit dings aren't dealbreakers, go ahead and give them a ring. Call and explain the situation, but don't be surprised if you're told that there's nothing they can do for you. Most companies won't work with you until you're actually late on the payment, presumably so that people are less inclined to scam them--"Oh, man, I just can't afford this..." and then the interest rate drops, but the person was just after a rate decrease.

If you get brushed off now, don't pay the current bill--let it go past due. Once it's past due, call again, and tell them--again--that you've lost your job and you'd really appreciate it if they'd work with you. You want to ask for both a rate reduction and a payment reduction. Be apologetic and self-deprecating, and be nice to them, even if they're being shitty to you. Sometimes they'll be willing to help you here; other times, you'll have to wait longer.

If they didn't work with you the first two times you phone, wait until the account is between thirty and sixty days past due. Call again. Explain again. If they're still not budging, break out the magic words: "I'm going to have to declare bankruptcy if something doesn't change. I just can't afford all these bills right now." Talk about how stressed out you are, how you're in way over your head. Most of all, mention the bankruptcy thing. It might be a lie, but it's also almost certain to get you the help you need. If you do declare bankruptcy, the credit card is at the bottom of the list of people who need paid. They really, really don't want you to declare bankruptcy, because it probably means that they're never going to see a cent from you.

You can, obviously, try the bankruptcy trick earlier on, but usually they don't start really worrying about your ability to pay until you're thirty days past due. It's also more believable that you'd be looking at bankruptcy after a month or two of unemployment, you know?

Obviously, none of this is a sure-fire thing, but in my experience, it's what's most likely to work.
posted by MeghanC at 2:03 PM on October 21 [1 favorite]

Yes, in my experience with legal aid agencies, credit card companies will work with debtors, especially now, but it is a Kafkaesque process. This is why a local Consumer Credit Counseling Service is very very helpful. Credit card companies often respond better to a consumer credit service than a consumer. If you are unemployed, you will likely qualify for most legal aid and consumer credit services.

See if you can find a local consumer credit or consumer legal aid agency and ask them for advice or for a self-help packet. Your bar association or the nearest federal bankruptcy court should have a list, if you can't find something in a search engine. I would advise against using self-help documents or guides you randomly find through google, unless you can verify their source. For instance, Illinois Legal Aid has some self-help available online.

In my experience in legal aid, I have found that yes, working out a forbearance (or a lump sum settlement for less than the full amount due) will result in reduction of your available credit. Which is only logical, since you are asking them not to go after you for payment because you have no current ability to pay. You have to decide what works better for you: forbearance and less or no available credit or incurring new credit debt while you are not paying down current balances that are incurring interest.

Good luck. It's a grueling, frustrating process, dealing with credit card.
posted by crush-onastick at 2:07 PM on October 21

Sometimes cards offer a "skip a payment" program without a hit to your credit report. You could call and ask.
posted by Jacqueline at 8:58 PM on October 21

I wouldn't call them. These people are ruthless. My story: I have really good credit and called a my CC company to get my purchase APR lowered by 2%, which I thought was reasonable. I had heard you could negotiate like this. And since I pay on my cards weekly and have never paid late, I thought I was good to go.
Not in these "trying economic times," my friend. In fact, the CSR looked at my records and told me, "Oh, since we have you on the phone, we're going to have to lower all of your credit limits." She looked at all of my cards and started slashing. One card was at 30k limit and she slashed it down to $2500. All of the CC companies are doing this, despite all of our protesting.
It's best to pay the minimum payment on each card, and consider a balance transfer to a card with a lower APR (watch out for the BT fee, though; avoid "no maximum" in the fine print).
posted by bunny hugger at 6:23 AM on October 22

I had similar misfortune of losing job without any warning or intuition my employment status was in jeopardy. I did not call the creditors, and because of other major life situations, I could not go there emotionally. Bad mistake.

Call and set up some kind of temporary arrangement. They will work with you, and you will have an opportunity to save your credit rating. It may even be shown on your credit report. In our trying economic times, your situation is shared by many. The creditors would prefer to keep you as a customer than selling your debt for pennies on the dollar. They are having a huge % of defaults, so in these circumstances you will have more leeway to negotiate.

Am I suggesting your credit will not be challenged with lowered credit limits, a freeze on further usage until you are employed, etc...no. But, it is much better to have a temporary inconvenience and lower credit rating due to debt to credit limit ratios, etc...but also best not to start charging for lack of funds. It can and will catch up to you later. Once you get back on your feet, you can let them know of your employment and eventually I would expect you will regain your previous use and limits.

Congress is trying to enforce new laws to take effect in December that will have safeguards against some of the predatory lending practices that were the results of new bankruptcy legislation back in 06. Hope it is pushed up from its original date of March 2010.

Good luck and save your credit rating!
posted by iGrasshopper at 4:39 PM on November 3