One of our readers, Renee, had this question:
Mr Credit Card,
We make our payments monthly and have not skipped any, however we have been a few days late. I know that has hurt us. We are in debt up to our eye balls! One of our credit cards Citi offered to lower our APR to 0% for 1 yr to help us get it paid off. The other one BofA would NOT lower our 28% APR because we had been late 2 times within 12 months. Our payment is 888.00, this is insane!! How are we suppose to get it paid off.. I don’t know what to do at this point?? We can’t change that we were 3 or 4 days late and now we have a high interest rate. The account has been closed. Not sure why..they state that we called and close it.. We don’t recall doing that. Do you have any suggestions for us?
Hi Renee, thanks for your question!
I do have a couple of suggestions for you that may help. Since Citi offered to lower your interest rate on that card, (They are normally great to work with from everything that I have seen) I am assuming you’ve got that card squared away.
So let’s take a look at the other card. You have a closed Bank of America account, currently at 28% interest with an $888 payment each month.
The first thing you need to do is to pull your credit reports and scores. I know that is not free, but I believe that you should be able to get an introductory offer from a credit monitoring service that would let you get them all for around $30-$45 dollars. (You can always get your credit reports for free, it’s the scores that cost money.) I recommend starting with Experian since it looks like they are doing a “Free credit report and score” promo right now.
You can also check out our past article “How to Get a Free Copy of Your Credit Report From all Three Credit Bureaus.” if you have any questions about this stage.
Now, once you have your credit reports in hand, look to see whether or not your Bank of America account is reporting the account as “closed by lender” or “closed by consumer”. It does make a difference to future lenders.
If it says closed by lender, that means that they closed the account, not you. If it says closed by consumer, and you did not close the account, then you can always call and argue the point with them – possibly getting them to open the account back up.
The other part of this step is your credit scores. Once you know what your score are, you will be able to decide which of the two options below will be best for you:
1) You can apply for a balance transfer to a new credit card with an interest rate under 28%, and work on paying the card down that way. You can check out our balance transfer page for reviews on which cards are the best, and which ones you’ll want to skip. We do list the introductory rates, and all the associated fees so that you don’t have to waste your time hunting for it.
You will want to use a balance transfer credit card as your first option IF: Your credit scores are over 700 -720, and you find a card that you feel comfortable with. There is no sense paying 28% interest if you don’t have to!
Now, if your credit scores are 700ish or below, you may want to look at this second option – but be aware that taking the advice below will lower your credit score a bit. It’s one of those situations where what’s smart financially is not what’s best for your credit score. So, that’s the disclaimer.
2) Go a month past due with Bank of America, and call their collections department. Collections reps are a whole new species as far as being willing to help you. If you get someone rude, just ask for a manager, or call back to get a different operator.
Now, why do I say go past due and talk to the collections department? Several reasons:
- Collection reps can remove nearly every fee you have ever had on the card - most of the time without a managers approval. Regular customer service reps cannot usually do this without a fight.
All you have to do is say,
“These fees and this interest rate are killing me! I will never be able to get this card paid off this way. Can you remove the fees and lower the interest? I would really like to make a payment with you today if you can do that!”
Many companies will not remove fees unless you specifically ask, so don’t be afraid to tell them what you need them to do.
- Collections reps get bonuses when you pay, so it’s in their best interest to work something out with you.
- Managers in the collections department can go above and beyond too - so don’t be afraid to ask for whatever you need to get the account settled.
If I were in your shoes right now, this is exactly what I would do, in that order. Check your report and scores, try to balance transfer, and then consider going a couple weeks to a month past due and dealing with the collections department.
I give you this advice because I believe you are a lot more interested in what’s smart for your family financially that what’s going to raise your credit score. In the long run, even if you have a few past due payments, it will be OK. Just keep your future balances low, and avoid being late after that – your score will recover. The important thing right now is just to get you out from under your debt so that you can move on to better things!
I hope this helps, please feel free to come back and tell us how things worked out – I would love to know.
Have a question for me? Leave a comment below!