Credit Managers?

Here are a few ways that customer credit limits established by the credit department can and should be used to help streamline the order release process while helping to control credit risk:

  • Establish a credit line for every active customer, including COD customers. Make certain customers are aware that credit lines can be changed from time to time, with or without advanced notice at the sole discretion of the credit department.
  • Always remember that credit line established for a customer is intended only as a guideline, and should not be used arbitrarily to deny credit to a customer.
  • It is important to update credit files and review credit lines at least once a year and adjust them based on the amount of credit risk associated with doing business with a customer. Major credit lines may need to be reviewed quarterly.
  • Work proactively with sales to determine what credit limit customers will need. Try to qualify customers in advance for higher credit limits. Why? Because it places a serious strain on the business relationship if orders are held by the credit department pending receipt of additional information needed to make an informed decision about whether or not to release the pending order.
  • Don’t rely on personal guarantees to ‘shore up’ a high-risk account when establishing a credit limit. In a worst case scenario both the company and the individual guarantor will file for bankruptcy protection.
  • When establishing a credit limit for a high-risk applicant that is a subsidiary of a low risk parent company, recognize that a parent company normally has no liability for the debts incurred by its subsidiaries.
  • Don’t over-use credit limits. Establishing appropriate credit limits will reduce the number of orders that end up on credit hold.

Category Categories: Financial

Lower Your Debt With Credit Card Debt Settlement

Credit card debt settlement involves satisfying your credit card debt by paying less than you really owe. Credit card debt settlement ranks low on the list of desirable debt solutions, but it’s one that some people must use to pay off debt and avoid bankruptcy.

How Credit Card Debt Settlement Works

There are two methods of credit card debt settlement: through a credit card debt settlement company or on your own. Credit card debt settlement companies should be avoided. They collect your payments for months before making a settlement offer – if they make an offer at all. Meanwhile, you continue receiving collection calls and negative payment marks on your credit report. You’ll get better and faster results settling debts on your own.

Credit Card Debt Settlement Payment Amount

Before you can settle your credit card debt, you have to decide how much you can pay. Credit card debt settlement can typically be done for 10% to 60% of the outstanding balance, depending on the creditor and age of the debt. The more delinquent your account, the lower the amount creditors are willing to accept to satisfy the debt.

Lump-Sum vs. Multiple Payments

You pay in one of two ways – multiple payments over time or a single lump-sum payment. Creditors prefer a lump sum or few payments (like 2-3) and are less likely to agree to a settlement that has to be repaid over several months. Figure out how much of the debt you can pay immediately and offer that. Once you’re negotiating with your creditor, offer an amount lower than what you’re actually willing to pay. That way, you have some wiggle room if your creditor wants to negotiate up.

Negotiating a Credit Card Debt Settlement

Once you have a credit card debt settlement offer, call your credit card company and to talk to a manager, someone in a loss mitigation, or similar department. The customer service representatives you first speak with are usually not authorized to take credit card debt settlement offers and you will always be told “no” when they couldn’t say “yes” if they wanted.

During the call, make sure you write down the name, phone number, and extension of the person you talk to. Also record the date and time of the call and the outcome. Don’t give up with a single phone call. You may get different and often conflicting answers from different people at the same creditor and sometimes even the same person on different days.

Credit Card Debt Settlement Watchouts

Your credit card company might close your credit card after settling your debt. That’s if your credit card hasn’t already been closed. You could also have your credit limit reduced or eliminated all together once the creditor realizes you don’t plan to pay the balance in full.

Credit card debt settlement typically requires you to be a few months behind on your credit card payments. At that point in time, your credit score will take a severe hit. The effect will be worse if you’re late on more than one credit card.

The federal government requires you to pay taxes on cancelled debt, including debt that’s been cancelled through credit card debt settlement. The bottom line, you owe the federal government more money which means you’ll get a smaller refund check or owe more money to the IRS.

Finalizing Your Settlement Offer

Final credit card debt settlement agreements should be in writing. Either draft an agreement of your own or have your credit card company send you an agreement. Make sure you and someone from your credit card company have both signed the agreement before you send payment.

Category Categories: Debt and Loan

At What Cost Credit Handed Out?

In this economic climate, many of us are faced with debts, far greater than we’ve ever experienced. The total UK personal debt currently stands at around the £1.5bn mark. The average household debt is approximately £16,500 (excluding mortgages) and it is estimated that 346,000 loan accounts are in arrears. However, even with these grim figures, credit companies are still more than happy to offer credit to anyone, it would seem.

Most of us will recognise the situation all too well; you’re weighed down with the day’s shopping and just about to pay for your goods at the till. Just before you hand over the cash, the cashier offers you a discount on all of your purchases if you sign up for a store card. “It’ll only take a second”. How could you possibly resist such an offer?

However this offer may sound at the time, you should always be wary; unless you are extremely careful with your money, store cards can come back and sting you in the future. In the UK, store cards have an APR of anything up to a staggering 30%. Many store cards offer an interest free period, usually between 30-55 days. In this time you should aim to clear your balance and reap the full benefit of the discount you made when signing up. If there is a balance on your card after this period, be prepared for the interest to stack up.

With credit being offered left, right and centre, it is easy for debt to spiral out of control. What is being sold as a ‘convenience’ could actually end up putting you firmly in the red. If you do take a store card, or any other credit card for that matter, make it your priority to make payments on time to avoid substantial late payment charges. Also, refrain from making the minimum payments. Pay as much as you can each month to clear the balance as quickly as possible.

Category Categories: Credit