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How to deal with creditors when you can’t pay

Here are a few tips on how to negotiate and speak with creditors when you can't pay your bills


Not knowing what to ask of creditors when settling debt can drag out the process. Here’s everything you need to know about how to speak to creditors and leave the process with as few headaches as possible.

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When you’re under financial duress and can’t send your credit card payments as expected, you need to reach out to the issuer and ask for help. If you don’t, major problems will ensue.

Communicating effectively and quickly can offset a host of negative repercussions, but it only starts when you pick up the phone. Here’s how to ensure a productive conversation that ends with a reasonable resolution.

See related: Should I work with a debt relief company or my creditor to pay off debt?

Understand what can happen if you don’t pay on time

Before approaching a credit card issuer for assistance, understand what can happen if you don’t pay your bill.

  • Late fees. If you miss the due date or send less than the minimum payment, the credit card issuer will charge you a late fee. It can be $29 for the first late payment, then go up to $40 for additional delinquencies made within six billing cycles.
  • Credit damage. Skip over an entire billing cycle and a late payment notation will appear on your consumer credit reports. Payment history is the weightiest credit scoring factor, so your scores will decline. The more delinquencies appear on your report, the worse your credit scores will be.
  • Higher interest rate. If your credit card has a promotional rate, such as 0% APR for six months, the issuer can raise the interest rate prematurely. On other cards, the issuer can increase the rate when you’re 60 days past due. These penalty APRs can be in the upper 20s, making a substantial debt very expensive.
  • Legal or collection action. After 180 days of nonpayment (or even before), the issuer may sue you for damages or send the account to a collection agency. In either case, your credit report will indicate a charge-off and your credit scores will plummet further.

Since the consequences for not paying your credit card are so negative, you’ll want to address problems swiftly. The best-case scenario is to contact the issuer while you’re still in good standing, but don’t avoid calling even if you’re already behind. Credit card issuers want to know what is going on. They can’t help if you don’t ask.

See related: What happens if you ignore debt collectors?

Know your options

You may wonder if you can use one card to pay the other to avoid delinquency. In general, you can’t do this – but even if you did, you would just be spinning your wheels.

Although you can withdraw cash from your card and use it to pay your bill, the cost would be prohibitive. Most issuers charge a cash advance fee of $10 or 5% of the balance, whichever is higher. Moreover, interest starts to accrue immediately, which averages 24.8% for cash advances.

Another way to cover another credit card’s debt is with a balance transfer, but you would need to be able to make the payments on the new account. If you don’t, it won’t be worth the trouble. Most issuers charge a fee of a few percentage points to transfer the debt (so a $5,000 balance may cost you $100 or more), and then if you miss the payment, the APR could exceed what you currently have.

For this reason, it’s best to work with your original credit card issuer. Your options include:

  • Temporary payment reduction or suspension. Often called a hardship plan, this short-term remedy gives you time to get back on track.
  • Credit protection. The credit issuer may consent to keep your account in positive standing while you’re paying less than the minimum.
  • Lower interest rate. Under some circumstances, credit card issuers will give you a break on the finance fees.
  • Waived fees. Upon request, many issuers will let the first late payment fee slide, but some will remove more that have been tacked on to the balance.
  • Debt settlement. Although not common, settling a debt for less than you owe may be an option if you’re many months behind.

Get your numbers in order

Outline what your financial situation is now and how it might change in the foreseeable future.

“You cannot discuss your current financial situation based upon your old circumstances,” says Roslyn Lash, a financial coach from Winston-Salem, North Carolina. “The budget should be your bare-bones expenses. A creditor won’t want to reduce your payment or make an adjustment if you are spending money on luxury items. Also, if you request a specific payment amount, it should be evident that you can make the payment without becoming delinquent.”

Subtract the total of your essential expenses from whatever income you have. Make a list of your creditors with their balances, interest rates and expected minimum payments. If, after paring your budget down, you have some funds left over to send to your creditors, determine how much that is. Then get your time frames in order.

If you expect your circumstances to change in a matter of months, make a note of it. No money to send and have no idea when things will change for the better? You’ll be working with that truth.

Develop talking points

Construct a reference guide for the conversation. Based on your budget and time frame, make a bulleted list with the following:

  • Your information. Include your account number and the length of time you’ve been with the financial institution.
  • A brief explanation detailing why you can’t make a payment. Be concise, such as, “I lost my job last month and have run out of savings.”
  • What you’ve done. Based on the budget you developed, write down your current income, essential expenses and the amount of money you have remaining for debt payments (if any). Also, include which expenses you’ve already cut out of your budget.
  • What you want. Are you hoping for reduced or suspended payments for a specific period of time? Lower interest? List out what you are hoping to gain from the conversation. If you’re unsure about the form of resolution you want, write, “Do you have a program available for people in my situation?”

“This one sheet, easy reference paper will help you organize your thoughts to stay on track,” says Lash. “You’re calling the creditors and they have a job to do, as quickly as possible. Putting it all on paper this way will help you not ramble or provide unnecessary information.”

Speak with the right person

Call the number on your credit card or statement and run through the prompts until you’re connected to a live customer service agent. Explain that you need to speak with someone about making changes to your account.

“Ask if this is the right department to deal with alternative payment arrangements,” says Aneesa Getaneh, owner of the credit restoration company Bloom Credit & Co. The first person you get can usually help, but confirm. If you’re met with resistance, then ask to be transferred to a manager or supervisor.

Start the conversation

Once you’re connected with someone who has the right authority, launch into your situation, starting at the top of your talking points.

If you’ve been with the credit issuer for many years, mention it. “Creditors like to see that you’ve been with them for a long time,” says Getaneh. They will have the year you started in their system, but it doesn’t hurt to remind them of the relationship.

Give an abridged version of your problem and what you’ve already done to make the payments. “Banks really do want to work with you, but they need to know these details and what you’re thinking,” says Getaneh.

For example, you might say, “I was laid off in March and am living on unemployment insurance. I’ve already pared down my budget to the bone, and my basic expenses are $1,800 a month. I understand that the minimum payment for this card is $150, but all I have is $25. I expect to be working and earning the same as I was before by July, at the latest. Would you accept the lower payment to keep the account current and late payments off my credit report until I do?”

Remain controlled

You may become emotional and break into tears or angry and want to yell, but Matthew Goldman, consumer credit expert and CEO of Vertical Finance, says to resist those reactions.

“The best way to get a positive resolution from a card issuer is to be calm, polite and factual,” says Goldman. “Remember that there are real people on the other end, who are often dealing with similar challenges to you. They are yelled at all day, but they also are limited by policies that they cannot change.”

After stating your situation and making the request, ask what the person can do to help. “Fundamentally, the bank wants you to be able to pay your bill over time, so working out a plan with you is expected,” says Goldman. This is business, so be businesslike.

“If you get upset or feel your agent isn’t working with you, just let them know you need to hang up (politely) and try again with another agent at another time,” says Goldman. Eventually, you’ll be connected to someone you can work with.

Don’t make idle threats, though. Karra Kingston, a bankruptcy lawyer practicing in Staten Island, New York says there’s no harm in saying you may be considering filing for bankruptcy if you really are. But if not, don’t use it as leverage for an extreme reduction of the debt, especially if the account is current.

“Creditors would rather get something than lose everything, and they may agree to settle the debt for less in that case,” says Kingston. “But it’s not going to happen unless you’re 90 days behind. Even then, some are hard to settle with.”

Come to a resolution

When you’re speaking with a helpful representative, make a point of listening to what that person can offer, and then negotiate until you are both satisfied. The solution has to be amenable to both parties. Credit issuers won’t forgive your entire debt or even a portion of it because you can’t pay, says Goldman, but they may be willing to lower your interest rate, spread out your payments or make another plan available.

It is very important to promise only what you can fulfill. Don’t say you need three months to get back on your feet when you really need six months.

Document what you’ve arranged, too. “Get the person’s first and last name, and their direct phone number or the extension,” says Lash. “Write down the date of your conversation and exactly what you agreed on. Ask when you will receive a letter of confirmation and if it will be coming in an email or snail mail.”

After that, you’ve completed the verbal part of the communication and now just need to follow through with the plan you’ve arranged. As you do, you will gain credibility with the issuer.

However, if you find that you absolutely can’t meet your end of the bargain, get back on the phone. “Trust me, creditors always want to hear from you when you’re having trouble making payments,” says Getaneh. “The worst thing you can do is ignore problems.”

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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