Q. Do you have any thoughts or recommendations for an individual that has $50,000 high interest credit card balance(s) – mostly American Express. She needs the cards to run her current business – so she doesn’t wish to cancel the cards – and can’t get the credit card companies to lower the rate.

A. I’m going to assume the person in question is having trouble making credit card payments due to high interest rates and you’re not merely asking because the interest rates amount to highway robbery. Which of course they are.

As you may have heard, banks are not being very cooperative with consumers these days. If someone truly cannot afford her payments, I’m sorry to tell you the choices are not very palatable.

One option may be to refinance them into another kind of loan. These may be silly questions, but I always ask them just in case: does she have equity in her home? Can she get a signature loan at her bank at a lower interest rate than her cards? What about a credit union, can she join one? Credit unions are easier to work with than banks. One may be willing to issue your client a line of credit at a decent interest rate so she can pay down a high interest card.

Now I have to tell you about the one nasty solution that many people are forced into: she could start missing her payments. Credit card companies have little incentive to cut deals with people who are current on payments. If she is 90-120 days late, the card companies will be much more willing to deal, even cutting balances. Take note, though, of the significant drawbacks to this option:

1. They will make her cancel her card, something she doesn’t want.
2. The interest rate on her other cards will go up, and the other credit card companies may close her accounts as well. This is called universal default, and it’s still legal until this July, when new credit card laws kick in.
3. Her credit will be severely impacted, reducing her ability to get other credit cards.

It’s a vicious cycle this game – the only way to grab a lender’s attention is to miss payments. Many people are finding out they have to do the same thing to get mortgage companies to take seriously their requests to restructure your home loan.

Have you successfully negotiated down your credit card interest rates or balances? Write us or leave a comment!

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