A reader writes:

Like most folks, we have lived on credit and have quite a lot to pay down. But several of these cards have interest rates close to 30% which makes paying them down a multi-year process. Our goal is to totally get off the credit train but keep a couple cards for convenience and travel (Amex and VISA).

My question is how is the best way to renegotiate with these companies? I have read that those who receive federal bailout money have to make adjustments as part of the deal. Is this only for those who are behind on payments or can’t repay? Are there ways short of those debit consolidation companies to settle these debts at less than the principal or reduce the interest rates enough so the payments actually get us to our goal sooner?

We have good credit now and want to keep it that way. We just don’t want to use it much anymore. Any information or strategies would be appreciated.

There’s been a lot of press about rate-jacking in the wake of the recession and new credit legislation, before the rules actually take effect in July 2010, but surprisingly few pixels on what to do about it.

Here are the best how-to links I’ve found, all from CreditCards.com:

• How to React to a ‘Rate-Jack’ Attack.

This is a step-by-step guide to options you can take, from canceling the card, to negotiating a better deal by phone, to transferring a balance, to even getting credit counseling and budget help. I highly recommend reading through the whole thing, including all the links, before you decide what to do. Under phone negotiation, for example, links include writing out a script for you to follow. It is clear, comprehensive, and will help you breathe. The preparation will be well worth your time.

• Sample Opt-Out Letter

The above story links to this letter. Many card issuers allow you to decline the rate hike within 60 days notice of the rate change, in writing. The card isn’t canceled, which is what you want in order to protect your credit score. But you will have to agree to stop using the card, and continue to pay off the balance. (So discontinue any automatic payments to this card.) This article also lists the correct mailing address for this letter for most of the major card issuers. (Note: AMEX does not allow opt-outs.)

• How Debt Management Plans Work

Here’s a peek at what derailed a proposed federal credit debt forgiveness plan, as well as a primer on putting together a debt management plan.

Bonus link:

• If you want to “listen in” on how your call sounds to the front-line credit bureau help-desk, read this fascinating insider account from the NY Times Magazine: What Does Your Credit Card Company Know About You?

Bottom line: They want your money, and they need your cooperation to get it. Which means they have to be willing to negotiate with you.

Now, you’re prepared to play on their turf.

Go forward, and good luck.

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Tags:   Credit bureau · Credit card · opt-out letter · rate hike · rate jacking2 Comments