As the economy continues to weaken, people are defaulting on their credit card bills at an alarming rate. Now some creditors are so desperate to ditch these high risk customers, they're willing to pay them for it.
If your credit card company offered you $300, would you take it? Of course, there's a catch: you have to pay off the balance and cancel the account.
American Express, once a card aimed at the wealthiest consumers, is doing just that. In 2007, the company lost more than $400 million � partially blamed on cardholders who could no longer afford to pay their bills.
Now, in an effort to get rid of more of their high risk customers, Amex is offering a $300 gift card to some cardholders as an incentive to pay off their revolving account balances by the end of April.
"They are trying to get ahead of the game and eliminate their losses," says Steven Murphy of the Tower Group, an organization that tracks consumer credit card spending.
Murphy says such incentives may just be the first step companies are taking to ward off the skyrocketing number of delinquencies before the bottom falls out on the credit card industry too.
"People that are in trouble have an opportunity to get out of trouble by talking to the banks," he says.
Over the past year, Bank of America and Citibank say they've also accelerated efforts to reach out to customers earlier in the delinquency cycle before their financial situation becomes too distressed, offering a number of options to pay.
Bottom line: Take advantge of credit card companies that are eager to negotiate with you, including wiping away some of that debt just to keep you from defaulting. Keep in mind, if a credit card company does forgive part of your debt, the IRS is going to tax that amount as if it is income.
(Source: CBS News)
http://www.theyeshivaworld.com/article.php?p=30963
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