Credit Card Debt Forgiveness Begins to Take Hold

It's not new; many Americans, prior to the recession, relied on credit cards and built up debt. As the recession worsened, more relied on credit card debt just to keep up. Credit card debt is unsecured, so banks would seem to be loath to forgive any debt, as opposed to mortgage debt (which they are already loath to forgive). Yet some are doing so.

Mortgage modification is the term used for efforts at altering mortgages, including some principal, sometimes, to keep borrowers from losing their homes. Rather than losing it all, credit card issuers are starting similar negotiations with borrowers. After all, unlike mortgages, there's nothing to repossess.

According to a Washington Post report, some lenders are lowering interest rates or minimum monthly payments for a specific period of time, waiving fees, or settling the debt by accepting less that the total.

Some might grow angry at debt forgiveness. Those who pay on time and in full are not basically being shafted. This is the same argument that was given over mortgage modifications, where principal was lowered. Can anyone doubt, after the mortgage mess, what would happen if the same sort of issue hit the credit card market?

According to ther report, most card issuers are (unsurprisingly) quiet about the practice. Industry executives did confirm, however, that the practice is becoming more common as card issuers face a record percentage of charge-offs. The charge-off rate, on debt that will never be repaid, was 10.52 percent of balances on U.S. cards for July, according to Moody's.

What does this mean? According to the report, many card companies are willing to work with their customers. While they, of course, fear that customers who can pay will inundate them once these programs become public knowledge, it is true that if you are in financial distress you may have some recourse.

In effect, if you are in financial hardship and have huge credit card debt you cannot repay, take a deep breath. Turn your credit card over. Call the customer service number. They may just listen.