Good Faith Credit Card Payments Backfire: Debt Experts Weigh In

From Alex Viecco, New Era Debt Solutions

It is obvious that you are dealing with a legitimate financial hardship. Capital One has been notorious for increasing balances quickly, and it is easy to see why. Although you are making payments, they continue to charge $39 late fees.

I would suggest you speak to a supervisor and ask to be put on their hardship program. If they refuse, contact a reputable credit counseling agency to see if they can assist you with that debt. Do keep in mind you will pay a nominal fee to work through a counseling agency, but if they can take your account, they will reduce the interest rate and put you on a payment plan that you will be able to keep up with.

Our recent experience with Capital One is that they will often settle directly with consumers for roughly 50% of the amount owed, but the balances can escalate quickly. (If you don’t pay and the account goes to collection), the third party debt buyers that may end up with the debt are far more forgiving, but keep in mind the balance will continue to grow.

If you are able to somehow come up with a lump sum of funds (to settle) you might be well served to settle the account directly with the creditor and put that headache behind you.

[Consumer Resource: Tips for Paying Off Credit Card Debt]

From Charles Phelan at ZipDebt.com

Sorry to hear about your situation. Capital One is a difficult creditor to work with. Yes, there are still “good faith payments,” but unfortunately, this particular creditor does not respond to that approach the way others do. One of the things that consumers often don’t understand is that underpayment of a minimum required payment on a credit card debt is not a helpful or productive strategy. You’re still charged a late fee, and your interest rate can go up to the default APR, further pushing out of reach any possibility of catching up again.

If this is the only credit card account that you have, then my recommendation is to take a tougher stand with Capital One than you have been at this point. I know this will sound counter-intuitive to you, but the best approach would be to suspend payment for two to three consecutive months. By letting the account approach 90 days late, it will open up the possibility of getting onto a hardship plan where the interest rate will come down, as well as the payment. This is basically a “do it yourself” approach to setting up a debt management plan. I need to caution you that this will negatively affect your credit score. However, since the account is already in late status, the major credit damage has probably already been incurred anyway.

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From Michael Bovee and Gerri Detweiler »