Major credit card lenders including JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) have done modifications for over $1.8 million credit card holders that are unable to pay off their loan balances.
Typically when a customer is delinquent on a credit card, banks will charge major fees and penalties to the account in hopes of cashing in when the borrower can repay again. Often, balances on delinquent credit cards will balloon and end up being 3 or 4 times the original balance. The customer is then faced with the option of paying the exorbitant fees, filing bankruptcy, or trying to negotiate a better deal.
With an increasing number of consumers falling behind on their credit card payments, some banks have begun offering customers workout agreements by lowering interest rates and even outstanding balances in some cases.
The modifications that banks are doing vary dramatically from bank to bank. Some banks will only work with customers that are behind on their payments. Others will only work with customers that are current on their accounts. Some banks are offering better interest rates and deals than to their customers than others as well.
Customers finding themselves unable to pay their credit card payment are advised to call their credit card company and try to obtain a modification. Cardholders need to have realistic expectations about what they will be able to get as part of a work-out, but there is room for negotiation on the part of the customer. Cardholders getting workout agreements that lower their balances should also be aware that having their balance lowered will result in a tax bill for the money that is written off.
