|by Mr Credit Card|
Here’s a question we got recently.
Dear Mr. Credit Card:
I was hoping of asking you for some advice as others may be in a similar situation. My partner lost his job last week, and we are in the midst of retooling our budget and strategizing on how best to handle the situation until he finds a new position. My question is this: should we use this unemployment as leverage in negotiating concessions from our current credit cards (American Express Platinum and Blue) or are we shooting ourselves in the foot. My first inclination was that we could surely use this as leverage to seek a reduced rate or even possibly a one or two month payment deferral. However, I’m worried about American Express cutting us off at the knees: we use our AmEx Platinum for all of our daily spending and tend to carry a balance that would be difficult (read: impossible) to pay off in one fell swoop. If AmEx were to close our accounts, it would significantly hamper our liquidity, even though our other credit cards are zero-balance. What would you suggest?
Thank you in advance,
Answer: Craig – I do not think you should. That is definitely a red flag for credit card companies and I have heard instances where rates were increased and credit lines decreased after credit card issuers found out that the primary cardholder is unemployed. These are steps that I would take.
1. Look for a card to transfer a balance
Both of you do carry a lot of debt. I suggest you either transfer your balances (or at least some of it) to another card or get a new card with 0% balance transfer deal.
2. Call credit card company
Yous should try calling the credit card company to see if they would reduce your interest rate. I wouldn’t even mention that you are in any sort of financial difficulty or anything like that. You should say something to the effect : “Hi, I noticed that my interest rate is x%. I am calling to see if I can have that reduced. The see what the customer rep says. If the customer rep says “No”, then just insist that you want to speak to the manager. If you get negative answers, simply call again at another time and you’ll get perhaps a more friendly rep.
Remember, you have to be polite because you are not in a position to pay off the debt, unless you are sure you can transfer the balances to other credit cards.
3. Make every attempt to pay all your bills on time
While universal default will not be allowed to be practiced next year (on the passing of the latest credit card bill of rights), the reality is that at the moment, credit card companies have been increasing interest rates if you have been late on your other bills. So make sure both of you continue to pay your bills on time.
4. Make Sure Your Partner Files for Unemployment Benefits
Make sure your partner files for unemployment benefits. This will definitely help you tide over the present situation.
While it is good that both of you are retooling your budget, I would say that you should also plan for a worse case scenario (ie your partner takes a while to find a job). For example, if you have two cars, you may consider selling one.
OK – I’ve been going on and on. But the bottom line is that you should not tell Amex about your partner’s unemployment situation.
Note – If you are in a similar situation, we would appreciate if you could share your views and tell your story.