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This question came about from a caller to a radio show - "I've got £20,000 worth of credit card debts and am coming into a substantial amount of money. If I pay them off will I get any interest paid back"
The simple answer to this was no. That is because credit card debt interest accumulates daily/monthly on the balance outstanding. The caller had in mind the settlement rebate you can get by paying back a fixed term loan early.
However, the interesting point here was that the caller had missed payments to the credit card companies and was struggling, making payments as and when. At this point the thing to bear in mind is that the account will have been flagged for monitoring - the card company will be aware that all is not rosey.
Strangely enough this leads to set of possibilities that are worth sharing. When debt turns bad there are priorities in debts. Credit Card debt is unsecured and is at the foot of the pile - mortgage, council, court and other debts are higher placed.
With that knowledge, you can be fairly sure that any signs of a credit card holder having problems and offering to settle the debt will be given serious consideration by most card companies. In the case of the caller, he could clear his debts with the lump sum but his situation was such that he would have no income coming in. In this case there is nothing to legally stop him from making an offer to the card companies for full and final settlement of the account.
How much to offer for full and final settlement?
Well, the worst they can say is no. So why offer 80% when they might take 50% or even 30%. Chances are they will say no, assuming that if you say you've got £x you've actually got £x plus a bit more....so they'll want to try and get that bit more too.
If you can get away with a lower full and final settlement you should also try to put into the agreement that they will remove all adverse information from your credit file.
Get it in writing
Before jumping up and down with excitedment, make sure you get their agreement in writing before sending them a cheque.
Once you have the agreement in writing from them, send the cheque with a covering letter stating that the enclosed cheque number xxxx is for full and final settlement of account number xxxxxx. By cashing this cheque 'creditcarduk' accept that this payment is for full and final settlement and will remove adverse credit information from credit reference agency files.
Send the cheque stapled to the letter recorded delivery. When the cheque is cashed it is now a contract that they must honour.
Is it morally right? Is it fraudulent?
Morally the above may raise questions about not paying your dues when you can. Fraud would only come into it if they asked the right questions - when offering to settle a credit card debt early you are doing just that - making an offer. The credit card company is under no pressure to accept. Financial institutions talk about products - think of debt as a product like a car, and your are offering an amount of money for that.
Every case is different, every person has different backgrounds. Perhaps if the situation were that someone were giving up work to look after a terminally ill spouse and the lump sum was a critical illness payment, would that make it ok? I'll leave that for others to discuss, but the crux of the article is that this situation exists.
Get more advice and help with credit card debts By: Steve Neale
Article Source: www.ArticlesBase.com
Steve is the webmaster and internet marketing techy person behind www.dcmmoney.co.uk
Steve regularly listens to the advice the business owner, John Baird, gives out on his weekly regional radio show on Heart 106fm.
Based on what people are calling about, the articles are therefore relevant and often topical
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