Will
Credit Card Companies Settle For Less - Yes Indeed
Will credit card companies settle for less?
The answer will most probably be 'no' if today were the 80s, the 90s, or the early years of the millennium. But
times have drastically changed with the financial crisis that, up to the moment, has not seen too much light of
day. Now more than ever is the average citizen burdened with credit card debts.
The website 'CreditCards.com' has reported that the average credit card debt per household has reached $ 14,743.
The Federal Reserve Bank of Boston also reported in January 2010 that US consumers hold 609.8 million in credit
card dues.
Consider also the following: According to the Fitch Ratings, the number of credit card defaults in March 2009 had
hit 11.37% while the National Foundation for Credit Counseling reported in April 2009 that in the last 12 months
15% of Americans or 34 million people have been behind in making credit card payments while 8% or 18 million people
have missed an entire payment. These were figures for 2009 or early 2010. Imagine what these numbers would be today
- maybe we would be estimating a total indebtedness of billions of dollars.
That being said, we ask the question again - will credit card companies settle for less than the
total amount owed inclusive of fees and interest charges? According to reliable reports, some credit card companies
have done just that. A Nilson Report said that in 2008 about 2.7 million credit card loans were modified. In the
same year, the American Bankers Association admitted that credit card loan modifications had gone up. These figures
were for 2008 and 2009 when the effects of the crisis are just being felt. In more recent times, the Bank of
America and the American Express have admitted to increasing lower negotiated settlements with delinquent card
holders, on a case-by-case basis. Some individuals have also reported an average of 35% discount on total credit
card debts.
Why Will Credit Card Companies Settle for Less
o A credit card is an unsecured debt unless you are holding a secured credit card. This means that the credit card
issuer can't forcibly take your home or any asset that you may have.
o Only legal proceedings can propel you to make payment but this entails expense on the part of the credit card
company and it takes time before a court decision is handed down. This action may force you into involuntary
bankruptcy and the card company is likely to get only a figment of the debt, if anything at all.
o Credit card retailing is just one of the businesses of most banking and financial institutions - they can recover
their losses through their other products and services. They would rather cut their losses rather than be
empty-handed. Shortening the time to get some returns on defaulted credit cards also minimizes their opportunity
costs.
Let this not however embolden you to default on your credit card payments. The costs may even be greater to you
since your credit score will be significantly lowered. You will have to deal with the hard consequences of such an
occurrence for many years, unless you negotiated for and was assured that no negative remarks will be written in
your credit report that will downgrade your score.
Will credit card companies settle for less - yes they will. They would rather be thrown in some bones than
no bone at all. But then, that may leave you with no bone at all for your future.
Source: Credit Cards For People With Bad Credit Rating
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