Letters To My Credit Card
by: Dave Ozment
Some of my favorite writing is in response to reader emails. Sometimes that means a response to a comment on the website but even more fun are the letters from readers asking for my advice. Granted, I’ve only had this happen a couple times and half of those were cases of mistaken identity, but the idea of offering advice to someone in need is compelling and engaging and rewarding.
Recently a sweet seasoned citizen sent me a message in which she shared her situation and asked for some direction. It was a busy day in the office but I felt compelled to reply even if my response was somewhat rushed. This led to string of emails and even my crafting a pair of template letters that may assist as she boldly and faithfully addresses her new financial realities.
Below I’ve excerpted portions from our discussion to share with you. I’ve also included links to the letters in the event you want to review those as well. However, it is very important to me that you don’t view those letters outside the context of the story and situational implications.
If you’ve spent much time on this site, you know that I am a strong advocate of personal responsibility. However, in some instances we are dealt circumstances that cause us not to shirk our responsibilities, but rather to address and honor them in an unconventional manner. I believe the situation below is an example and my advice and support are geared towards that unconventional solution.
Read along and post your comments below… if you’re reading this via email or facebook, take a minute to click over to the site to add your comment. I feel strongly about this situation and encourage and invite a “strong showing” in the online comments for today’s edition.
Original Message to me from… we’ll call her Ella
I have contacted The Credit Exchange to help settle my debt problem with what they call debt settlement, Is a good idea to do this, I am 75 years old and my husband is 63 had to take early retirement due not being able to work due to bad health and our income has gone down drastically and now there is no way to keep up with our bill load. All we have now is a social security check which is our only income. I am afraid this company is out to get my money only and not help settle my bills with the creditors. I don’t know where to turn.
My Response
Thanks for your message. I appreciate you reaching out to me with a question and I’ll do my best to give you some sound advice.
However, first allow me to clarify that I am not Dave Ramsey. I am a fan (thus the name of the site) but my name is Dave Ozment.
Now, I can, and will, still offer quality advice, but I want you to know the source. You can read more about me on my site – DoYouDaveRamsey.com.
OK, on to answering your question…..
NO, NO, NO, NO, NO, and NEVER… please do NOT use a debt settlement company to assist you with your situation. Now let me explain why I feel so strongly about this.
Debt Settlement companies promise 1 thing – lower payments. However, they rarely follow through and are NEVER worth the cost. Let me explain why:
The only reason a creditor would ever accept less than what is owed, is if they think they won’t get paid at all. Debt Settlement companies, in general, will chase this angle by collecting a monthly payment from you and then NOT sending it to your creditors. They may then try to negotiate a lower payment but they often fail. I think they fail for 2 reasons:
1) they are not as personally invested in the negotiations as you would be and,
2) as a creditor, why would I accept less from someone who I know has just been making monthly payments to a debt settlement company? No thanks, I’d say as the creditor, just send me what you’ve been paying them.
If your situation is dire enough to seek relief outside of simply paying the amounts due (and yours presents that way), there is no reason to pay someone not pay your bills when you can do that on your own. See the thought process? Once you’ve saved up some money, and the creditor has not been paid for a while, you can negotiate a settlement with the dollars you’ve saved yourself.
Here are 5 points to keep in mind as you work through your situation:
1 – Pay for food, shelter, and utilities first, even if that’s all you pay!
2 – Mail a certified letter to each of your creditors letting them know that they will not be paid but that you’d consider a settlement figure from them in the future if they are interested – I will volunteer to help you craft this letter if you are interested
3 – Accept settlements only if the terms are received on paper and in writing
4 – Never allow electronic access to your accounts
5 – Be very careful with your checking and savings accounts. Social Security dollars should not be garnished or pulled from an account due to a legal action or judgment. However, if your creditors sue and you are unable to reach a settlement, and they win a judgment, they may be allowed to sweep funds from your account. I don’t say this to frighten you, but to warn you what could happen if the creditors sue. That is likely a ways off, but worth keeping in mind.
I hope this helps and please feel free to reach back out to me if you want to discuss this further or if I may be of additional assistance.
Thanks and God Bless,
Second Message from “Ella”
I would appreciate your drafting up the letter to be sent to my creditors by certified mail.
….Waiting to hear back from you, Thanks again.
At this point I realized I had signed on to provide more than simply an encouragement or word of advice via email. Now I was somewhat engaged in the process of her situation. To be honest, I felt a little conflicted and I was not overly disappointed that work kept me from responding for several days as it allowed me time. On the one hand it was easy to view “Ella” as I would a member of my own family and the advice and direction flowed freely. On the other hand, I was afraid that I might be venturing onto thin ice. What if my advice was wrong, what if it exacerbated the situation? And could there be legal ramifications? Finally I asked myself the Dave Ramsey standard when it comes to giving advice to another, “What would I do if I woke up in your shoes?”
Now the answer to this one was easy. I knew exactly how I’d handle the situation if I, or a member of my family, were involved. And with a little disclaimer wording, I set forth my response.
My Response
As promised, I spent some time this afternoon crafting letters you can use with your creditors.
Before we start, however, it is very important that I share the following disclaimers with you first. I am not a lawyer or banker or financial planner. My recommendations or advice only represent my opinions and are not grounded in professional training or education. The advice I offer to you is exactly the same I would follow myself or provide to family and friends but it should be followed by you only with your full understanding and ownership of the steps taken.
With that said, let me share again my opinions.
You approached me with questions about using a debt settlement organization and I strongly recommended that you don’t follow such a path. As we have only exchanged a few emails, I am not fully aware as to the types of debt you have. This is important and something I should have already asked. As you were thinking of engaging a credit service, I assumed you are dealing primarily with credit card debt.
If you have a car loan or mortgage loan my advice today will not work. The creditors will simply repossess the car or foreclose on the home. In these circumstances we’ll need to devise another plan and I’m willing to assist in that as well.
However, for unsecured debt – credit cards for example – this approach and the attached letters are exactly what I would use or offer to a family member if they were in a similar position.
The key principle here is that you respect your debt obligation but have new life circumstances that negatively impact your ability to repay the full balance. This is not a breakdown of integrity but rather an honest breakdown of ability. I emphasize this because there are bad people who would avoid a bill even if they could pay. I don’t believe you are that person and that leads me to want to help.
For that reason, I’ve crafted and attached 2 letters you can take and personalize for your needs.
Both letters need to be customized to your specific creditor. I have <bracketed> places where you will need to insert your personal information – name, address, account information, etc.
One letter assumes no ability to offer a settlement at this time. It suggests a willingness to settle in the future but offers no timeframe for settlement. Based on your last message, this may be the better option at this time.
The second letter allows you the opportunity to propose a settlement and the places for that language and proposal are clearly marked. If a creditor has not been paid for several months or the prospects of payment are very low, a 50% settlement may be valid. In extreme cases, perhaps even less.
You may want to start with the first letter and follow-up with the second letter once you’ve been able to save some money.
It is my recommendation that you send this letter to 3 levels within a credit organization; 1 copy to the customer service center, 1 copy directly to the President of Customer Service, and another to the CEO. For the last 2 you’ll need to do some research on their web site to find these individuals and to collect the mailing address to the headquarters – send these letters to the intended recipient by name rather than just their title. These 2 will likely have the same address which should be different than the first.
Save a copy of each letter and the return receipts as they come back so you’ll know which letter was sent in each instance.
As for the collections letters – again for credit cards only – I personally would ignore them and the collections calls which are sure to follow. On the phone, I’d simply state that you are addressing this issue with their executives and that you appreciate their call then offer them a kind “good day”. Meanwhile, I’d file the letters in the recycle bin, unless it is a settlement offer or a response to your letter. You’ll want to follow-up with those letters in accordance with your ability to settle at that time.
This is a lot of information so please let me know if you have questions. In the meantime, good luck and God Bless.
Three or four more emails were exchanged and my heart ached when she questioned her strength to power through and leaped with encouragement when, in agreeing to allow me to share this story with you she responded:
“In answer to your question, that will be fine. I would be happy to be part of helping someone else if at all possible, although I am sure that other people have worse situations that I have. Thanks again for your help.”
My bet is that “Ella’s” strength will carry the day and she’ll be stronger and wiser for the experience.
Godspeed “Ella”.
Letter 1 – No Settlement Letter –
Letter 2 – Settlement Offer Letter –
Photo By:
Hi, I have a similar situation as I am now a full time caregiver for my Dad, who is journeying through Alzheimer’s, after my Mom passed away in 2009, and I moved from a town where my income was 85% more than it is now, and way more consistent. I was paying down my credit card debt, through CCCS, until I wasn’t able to maintain the monthly amount after having paid on time for over a year, then they dropped me, and I also have a tax liability, that I had been paying Tax Defense Network to help me with, while making a few payments on one of the tax years, yet they too dropped me when I couldn’t pay the balance of their fee. Could you please re-post your settlement offer letters, or email them to me, and if you have any insights on how to handle a large multi-year tax liability, when my income is 85% less, and sporadic, and my only asset is my car (still under a loan that I have struggled to pay each month), that is needed to support my Dad, and have transportation for work, in a town where getting to assignments requires a car. I would greatly appreciate it. I desire to pay off all my debt as soon as possible given I don’t know how long this journey through Alzheimer’s may last, nor how much less my ability to bring in an income – to just pay my base expenses which are food, car loan, car insurance, let alone pay on debt – will last. Thanks in advance. Peace. Pat
Dave, thanks for the great work. I’m a fellow Dave Ramsey fan. Here’s what I blogged recently… please feel free to share if you think it’s helpful.
Peace, Tim
How credit card debt sucked the life out of my life
Why am I ranting about credit card debt on my music blog?
Because too many of us musicians and artist-types have used a credit card to buy a guitar. Or an amp. Or groceries. And too many of us have been burned.
Case in point: I was once foolish enough to buy a guitar amp with a credit card. (I get extra bonus stupid points for doing this at a pawn shop.) Of course I couldn’t afford to buy the amp. (Roland Jazz Chorus 77. Mint.) I was a starving college student. I was also 19 or 20 years old, and I’d recently received five or six credit card applications in the mail. I thought this was FREE MONEY! Being young and ignorant, I responded accordingly, applying for every card I could get my hands on. And every card I received felt like a blessing.
How wrong can a guy possibly be?
Anyway, back to the amp… after taking it home, playing it for a few months, and using it to earn a grand total of exactly $0.00, I decided I was in love with a woman. I took the amp back to the same pawn shop and hocked it for a diamond ring.
Two months later, when the relationship ended and I took the ring back to the same pawn shop, they were happy to buy it back from me. For 50% of what I’d paid for it.
They still had the amp, and I wanted it back. But I didn’t have the full amount. And guess what… they only would accept the minimum $15 payment OR the full amount. After a few months of minimum payments, I realized I would never get the amp back.
So, in conclusion, I lost the amp. I lost the ring. I lost the girl. But I got to KEEP all of the credit card debt!
That’s how this game works.
So here’s my rant. Using credit cards = being in debt. For life. It means sending part of every paycheck to a credit card company. It means living life in debt.
In contrast, being DEBT FREE = walking down the street with a smile. It means not worrying about how the bills are going to get paid. It means abundance, wealth, joy, and the ability to GIVE.
I lived all of my adult life (from age 19 to age 41) in debt. Then I woke up, paid off all of my debt, CUT UP ALL OF MY CREDIT CARDS and closed every credit card account, built up an EMERGENCY FUND of six months worth of expenses, and now my wife and I are saving for a house. (Say it with me: We won’t even THINK about signing a contract until we have at least 20% down, and the terms will be a 15 year fixed mortgage with monthly payments that equal no more than 25% of total income. Until then, we wait, we work, we save, we stay in GRATITUDE for all of the abundance in our lives.)
(NOTE: My wife and I both work for non-profit agencies. It took us almost two years of constant effort to get ‘debt free’. It was NOT the overnight cure that I’d hoped for. Much to my surprise, I’m finding that nothing worthwhile in my life IS a quick fix.)
What’s happening today?
When I get my paycheck each month, I don’t worry about “minimum payments” or “late payments” or “missed payments” to any credit card company. I laugh all the way to the bank. When I want to rent a car or buy an airline ticket, I use my DEBIT CARD. (If a company doesn’t accept my debit card, I don’t USE that company.) I like to pay CASH for things. I don’t owe anyone ANYTHING. Especially not a credit card company.
And with all of the energy and passion that is freed up by releasing debt-related fears and worries, I have more energy for my music, for communing with nature, for connecting with my colleagues, family, friends, and loved ones. My life is simply fuller, richer, and more delicious than ever before!
If you want to live a life of abundance, I recommend getting out of debt and never, EVER using credit cards again. I recommend the movie “Maxxed Out”. I recommend Dave Ramsey’s “Total Money Makeover”. If you aren’t into the religious/spiritual angle, just set that part aside. The financial wisdom is worth the cost of admission alone.
Credit rating? I choose to build wealth and not worry about my credit rating. If having ZERO DEBT gives me a bad credit rating, I’m okay with that. There are mortgage companies like Churchill Mortgage who do MANUAL UNDERWRITING to determine my financial position. They don’t worry about my three-digit FICO score. If I’m in great financial shape, they’ll know it. And I’ll still be able to buy a house at great rates.
(Sorry, Suze Orman. I’ve read your approach and I know you want to protect that FICO score. I’ve also read that you are sponsored by the folks who created the FICO score. Is this true?)
The big banks can KEEP their airline miles. They can keep their complimentary ball caps. They are targeting young adults and college students. They are predators.
Kill off debt. Build wealth.
We can all choose to get rich SLOWLY and have something to pass on to our heirs and favorite charities. We can choose to squeeze the juice out of life. We can choose to be happy. We can choose to be debt free.
And we can choose to start NOW!
Light, love, joy and abundance to you!
(*Special thanks to my father and to my friend Miguel DeLeon for pestering me for years to check out Dave Ramsey’s approach to building wealth and living in abundance. And special thanks to Dave. I’m so glad I finally listened to you!)
Good stuff Tim, that’s really good article. Thanks for sharing. Next time you have a like minded rant I’d welcome a guest post. I like your style.
Dave
Thanks, Dave. I look forward to it!
Hi Dave Ozment, This was just what I needed today. I want to copy and paste this site to all of my friends and family. It seems everybody is out to make a buck, and don’t care who they hurt in the process. I beleive that these so-called “Debt Consolidation” companies are no better than filing for bankrupcy. In fact, I have heard that they adversely affect your credit score more than filing for bankrupcy.
Thanks Pam… yes, please do help spread the word. WE are the ones who need to manage our money. We don’t need a clown lending company tellings us what we can afford so that we latter need a scamming loan consolidator helping us get out of debt. If we’d be adults we could avoid these types of training wheels on our lives.
Thanks!
Dave
Wonderful post – I was working on a similar article which I will probably still take a shot at, but from a slightly different angle. Thanks for sharing this with your readers…Obviously a lot of others appreciate it too!
Hey Dave,
Great Post and Kudos to you for Helping Ella, and not letting some Debt Settlement Outfit get their claws into her and siphon what little money she had. For consumers in situations where they are completely judgment proof and especially if they are living on social security only, it is a much different ball game. It is unfortunate that most of these Debt Settlement outfits are simply marketing firms, that are big on promises and short on results.
While debt settlement can be the best option in certain situations, the way most of these debt settlement guys operate is completely ridiculous.
.-= Damon Day´s last blog ..Debt Settlement Companies – Top 5 ways they can Screw you! =-.
Thanks Damon, I appreciate your comment. I like the idea that many settlement companies are really marketing organizations. I think that sums it up. I’m sure there are reputable organizations doing good work in this area but the industry is littered with too many dregs to venture the risk in my mind.
Thanks!
Dave
Hey Dave,
Yup, that is exactly what they are and the very reason that they typically charge such high fees. Yes there are a very small number of good companies that actually put the needs of their clients first. After many years in the industry, I can still count the companies that I would even consider recommending to a client of mine on one hand. That really tells you something considering there are 100′s of Settlement Companies out there. They go out of business and start up every day.
.-= Damon Day´s last blog ..New Debt Settlement Video is Eye Opening for Consumers =-.
Wow, Dave. Tons of great information here and I think Ella’s plight will inspire more than a few.
I recently was a day late and a dollar short on paying a minimum on a revolving credit line and I just this last week got the fantastic letter informing me that my new interest rate would be about 27% plus prime. Have a nice day!
Of course, the letter continued, I am more than welcome to reject the rate increase. All I need to do is send them a letter in the next 60 days and pay off the balance 100%. Haha.
Obviously, they don’t expect anyone to take them up on that, especially with the balance I carried. So, I’m refinancing my 15 year mortgage (lowering said mortgage by a point) and paying off the creditor in full. Jerks won’t squeeze me if I can help it!
Time to start living on cash/debit only, which I’m very much looking forward to.
I almost forgot that I did phone these financial geniuses to see if we could reach an agreement on a penalty rate for me that I could financially handle without defaulting. They basically laughed at me and told me to jump out of a window. “OK, sir. Here’s what I can do for you today. I can offer to move your 27.99% interest rate to the special rate of 26.99%.” Naturally, I told him to keep his dirty money and hung up.
Hey Greg, good to hear from you buddy. Yeah, credit cards are a dangerous thing so I’m glad you were able to shed one while also lowering your mortgage. Debt consolidation can be good but can be a trap too if you don’t stay away from the CCs… but it sounds like your recent ‘royal treatment’ will keep you honest.
Hey, not to scare you, but watch your other cards like a hawk. Many have a universal default clause in the contract. This allows card B to raise their rates overnight even if you pay them on time every month because you’ve have an ‘event’ with Card A.
It is so easy to scoff when someone ways that CCs are like handling snakes, but when you get bit you know its true. Keep up the good fight!
Dave
From my perspective credit card is a tool that can either simplify your life but more likely to make it very complicated for most of people (not considering banks of course).
When choosing to apply for a card you need to be extremely cautious – these banks who send you a piece of plastic want to have you time and efforts results instead.
From my prospective having no credit card in modern world is a extreme position, but having only one credit card which you can control (and always pay before any interest begins to charge).
My last blog about my credit card experience: Credit card statements
Alex.