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What do you do if you find yourself in a position where you can’t make your credit card payments? You could ignore the bill but that is a strategy that leads straight to financial ruin. What follows are steps you can take to mitigate against financial disaster.

If you cannot pay your credit card bills your first step is to contact the card issuer immediately. Failure to communicate with your creditors is a sure step toward financial catastrophe. Most customer service representatives will push for at least the minimum payment, generally 5% of the total outstanding amount owed, but never less than $20.00. You may try to convince them that your situation is dire but temporary, in which case you may be able to reduce your payments to between 2% to 2.5% of the outstanding balance. In some cases, especially if you have a history of timely payments over a 6 to 12 month period, the customer service representative may have the authority to allow you to skip 1 or 2 payments with no penalty attached. Be sure to get the name of the person you spoke to and make sure you get the appropriate mailing address because you must follow up the conversation with a letter that restates the arrangement you agreed to on the phone. The form of that letter should be something like the following:

Dear Sir of Madam:On (today’s date) I spoke with (name of CSR) about my credit card bill. We agreed to the following arrangement: (outline the arrangement made).

If I hear nothing to the contrary within 30 days, I will assume that you are in full agreement with my understanding of this arrangement.

Sincerely,

It is important that you pay your credit card bills on time and in full. If you pay late you are subject to late fees that can be as high as $40.00 and an automatic increase in interest to as high as 25% or even more. What this amounts to is that your balance will increase faster than you have the ability to pay. In addition you will be subject to having adverse information added to your credit report which, in turn, can have the effect of having other creditors increase the interest rate they charge you. Of course, if you pay the bill in full, you are never subject to interest charges at all.

When you find yourself in a cash crunch, you can negotiate to pay off the balance owed in full with your credit card company. Many will waive late fees and, while it is nearly impossible to get the creditor to agree to remove interest already charged to your account, it is quite possible to have them agree to stop adding any future interest charges to your bill while you are making agreed upon payments.

If you have arranged to make payments to pay off your balance, ask your creditor to report your agreed upon payments to the credit bureaus as being made on time and as agreed. If they agree to this then your payments will not be reported as past due

When negotiating with your credit card company make sure you never agree to pay more than you can afford at the time you make your agreement. You must honor the agreement you make or the company will not honor their part of the agreement thereby causing you to fall into default. Not only will this be reported to the credit bureaus causing you to suffer an increasingly damaged FICO score, but it will make any attempt at negotiation in the future impossible.

One strategy for never falling behind in your credit card obligations is to treat your credit cards as an extension of available cash. Only use your cards for purchases you have budgeted. Never, ever use credit cards for impulse purchases. Pay the bill within 15 days of its arrival and you will never find yourself in the position of having to negotiate with your creditors.

Roger Passman is the President of WDC Financial Services, Inc. His firm works with clients to restore damaged credit, negotiate payment plans, and reduce debt. You can visit WDC Financial Services at http://www.wdcfinancialservices.com