If you are having trouble affording your minimum payments, what should you do? Fight with your credit card company to reduce the interest and fees or declare bankruptcy and be done with it? A reader, Pablo, had this question:

Is hard for me to pay my credit cards……. I am thinking of just going through bankruptcy. Should I? After reading the comments here, Another idea is I am going to ask the credit cards to lower interest rate before I do it. Is there anything else I can do?

My cards are 8 and 5 percent but there is one 13 percent which is the one that is killing me……………. my credit is good (never late) even though they lowered my available credit and do not want to give me $ anymore…Pablo

Thanks for your question Pablo.

The best thing to do is to explore all of your options. You can start by calling your credit card companies. Especially the one with the 13% interest rate.

Ask them to do all of the following for you:

• Remove all of the late and over-the-limit fees on the card.
• Lower your interest rate.
• Upgrade you to a different account with a better interest rate.
• Give you an “introductory” rate that’s lower than what you are paying now, if they can’t do anything else.

The key is to negotiate the terms on all of your credit cards to be as good as possible. Not only will it help you to save money all the way around, but it may help you avoid bankruptcy.

You will have to talk to a manager or supervisor to get these things done. Make sure that you tell them you are planning to balance transfer all of your debt with them if they can’t help you. That should get you some results, at least.

Transfer Your Balances:

If your credit card company will not work with you no matter what you do, then it makes sense to try to transfer all of part of your debt to an account that has a lower interest rate. Whether or not you can do this depends on your credit score, but it is worth investigating the option – especially since you don’t have a history of late payments.

You can find out more about the best balance transfer credit cards here:

Consider Debt Negotiation:

If you are unable to transfer your balances, or get your credit card companies to negotiate with you, then it’s time to call in the professionals. Hire someone like Sam Sky (the debt negotiator that we interviewed.)

A professional like that will be able to drastically reduce your payments and your interest because they have years of experience doing exactly that.

In the interview we did, Sam said that he could negotiate people’s debts down as low as 33 cents on the dollar, so that’s a pretty good alternative to bankruptcy!

You can find out more about Debt Negotiation Associates here:

Bankruptcy as a last option:

Bankruptcy is definitely not the option that you want to tackle first. In fact, it’s best if you can avoid getting there at all. However, if you are in a truly dire situation, that is what these laws where designed for.

If you have questions about whether or not bankruptcy is a good option for you, make sure that you have a free consultation with a lawyer in your state. Each state’s laws are different, so your best bet is to find a local lawyer who can explain the process to you and tell you whether or not it’s even the best thing to do in your situation.

Thanks for your question Pablo!

Another reader, Ron, had this question:

Hello Mr CC, A few years ago I was approved for the Orchard Bank Secured MasterCard. It stared off great, but eventually I lost my job and wasn’t able to pay my balance which led to them closing my account.

I have been paying down my balance on time and will eventually have it paid off soon. My question is, what would be better for me to do, try to reapply w/my current credit, which has improved a little since I first applied or since I’m still a Orchard Bank customer ask them direct if they would re-open my account based on my current credit status? Ron

Thanks for your question Ron!

As far as which one would benefit you more, it’s going to be about the same in terms of your credit score.

Most likely HSBC is going to pull your credit score when they attempt to re-open the closed account, and they are definitely going to pull it when you apply for a new account.

I would say just give them a call and ask them to re-open it. The reason I say this is because if they do re-open the old, closed account, it might raise your credit score slightly since the length of time you have had your credit accounts does effect 15% of your credit score.

It’s possible that the old account will continue to show up as an old account (and not a new account) – if it does your score will go up.

Either way your score will take a slight ding too – from the credit inquiries.

It’s a really good question and I wish I had a more definite answer for you. Calling to have them re-open the old account at least gives you a chance at having a slight boost to your credit score starting out.

Regardless, having another open account that has a low balance and regular payments will keep raising your credit score over time too.

Thanks for your question Ron!

Have a question for us? Leave a comment below!

Keep Reading:

• The FICO® Score Breakdown
• Credit Card Debt Negotiation or Debt Settlement
• Credit Card Debt Negotiation – Not All Opportunities Are Created Equal

This entry was posted on Tuesday, February 17th, 2009 at 15:11 and is filed under Debt Reduction FAQ. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.