- Different creditors behave differently.
- Review how Bank of America generally reacts to debt consolidation programs.
- Understand how your creditors react, before finding the right solution.
My Biggest Debt is With Bank of America. What is My Best Bank of America Debt Consolidation Option?
I am struggling with credit card debt. My biggest debt is my Bank of America account that I owe $14,000 on. My total debt is closed to $30,000. I am not late on any payments, but am barely getting by. I've been using my cards to cover some of my basic expenses and am getting close to maxing out my accounts. I know I can't hold things together much longer. I need help. Is there a Bank of America debt consolidation program that would help me? What do you suggest?
Thank you for your question about your credit card debt, specifically your Bank of America credit card debt, and whether there is a Bank of America debt consolidation option or other solution that will help you.
Bank of America is a full service bank, offering a variety of services including checking and savings accounts, credit cards and a Bank of America mortgage department. Bank of America debt consolidation loans are also available, although they require strong credit and income and generally come with high interest rates.
Contact one of Bills.com's pre-screened debt providers for a free, no-hassle debt relief quote.
Call Your Creditor
Whenever you are experiencing financial strain, it is worthwhile to contact your creditors directly, before you miss any payments. In your case, you should call Bank of America and your other creditors to find out if they offer a financial hardship program that could give you some temporary relief. You may get an interest rate reduction or permission to make a smaller than normal minimum payment, without suffering late fees or a hike in interest rates.
If your credit is in good standing, you can look into a balance transfer offer as a debt consolidation solution, working to move as much high interest debt as you can into a lower interest rate. Keep in mind that balance transfer offers come with a low 'teaser rate' that will adjust into a higher rate, once the introductory period ends. It is your responsibility to know how long the low rate lasts and what rate you will pay once it adjusts.
- If you are unable to pay Bank of America or your other creditors as agreed and you can't work out a solution with them, you will find yourself subject to collections. Not every creditor behaves the same and even individual creditors treat different customers differently. Still, there are some basic strategies that Bank of America and other creditors use:
- Most creditors attempt to collect a debt internally, before referring the debt to a law office for collections.
- Some creditors use in-house legal departments to collect on the debt, though that is becoming rarer.
- Accounts generally are referred for legal collections when they are somewhere between six and nine months delinquent, depending on the creditor.
- Creditors have thresholds for what they identify as accounts worth pursuing via legal collections, with the amount owed along with state specific collection laws being primary considerations. For instance, creditors are less likely to pursue legal collections in states that don't allow for wage garnishment, such as Texas, Pennsylvania, North and South Carolina.
- Some creditors pay closer attention to your specific account activity, when deciding whether to pursue legal collections. For instance, Bank of America, Citibank, and Chase, pay less attention to recent balance transfer activity or cash advances than do American Express or Discover.
- Creditors that are unable to collect anything after your debt has been contracted to a law office usually sell the debt to a debt purchasing collection agency. This frequently happens approximately 18 - 24 months into the collection process.
If BofA or your other creditors are not willing to work with you, you may need to seek help from some type of professional debt relief organization, whether a credit counseling firm or a debt settlement firm. It's valuable to know how you creditors work with their customers, so you can plan an effective strategy for getting out of debt.
Based on research done by Bills.com's editorial staff, here are some specific facts about Bank of America and how it deals with accounts enrolled in debt relief programs.
Bank of America Debt Consolidation & Credit Counseling
If you enroll a Bank of America account in a credit counseling firm's debt management plan (DMP), you should expect:
- A monthly payment that is 1.98% of your account balance
- A minimum monthly payment of $15
- Bank of America sets interest rates for accounts in a credit counseling DMP differently than almost every other creditor. Whereas most creditors enroll accounts at a set interest rate, irrespective of who is enrolling the account, Bank of America looks at each consumer's financial profile and makes a judgment call on a case-by-case basis. We believe the average interest rate reduction is to 9%, however some BofA accounts enrolled in a DMP can end up with an interest rate as high as 14.9%. If your current rate is at or below the level BofA determines is right for the DMP, not only is there is no reduction, but your rate will be increased! If you have a card with an interest rate below the one the DMP will put in place, you can try keeping the card out of the program, but most DMPs require you to place all of your cards into their program.
Bank of America & Debt Settlement
Debt settlement is an option to consider, if you are experiencing a financial hardship. Debt settlement is an aggressive form of debt relief designed to get you out of debt in 24-48 months, provided you can make the monthly program payment.
Bank of America is willing to negotiate settlements in many instances. Based on an audit of hundreds of Bank of America settlements negotiated by professional debt settlement negotiators, the average settlement negotiated was in the range of 50% of the balance clients enrolled in the settlement program. While an individual can try to negotiate settlements with his or her creditors, many people find that it is well worth paying fee for a reputable and experienced settlement company.
Make sure to find a debt settlement company that does not charge you any up-front fees and is fully compliant with FTC regulations. Bills.com recommends choosing a firm that is a member of the AFCC (American Fair Credit Council) and whose debt consultants are accredited by the IAPDA (International Association of Professional Debt Arbitrators).
Bank of America & Legal Action
Bank of America is not the most aggressive creditor, when it comes to taking legal action against delinquent debtors. Bank of America usually waits nine months after the first delinquency before referring its accounts to outside legal collections. Not every account that is 9 months late will be sent to collections. Bank of America reviews the size of the account balance owed, the state collection laws, and whether the debtors employment history and assets make collection likely.
Bills.com recommends that you look into all your debt relief options before making any decision, in order to weigh all the pros and cons. Use Bills.com's free Debt Coach tool, which was positively reviewed by the New York Times and by CNN. You can easily review your available debt options, based on your priorities for getting out of debt, and receive a solid idea of what your total costs will be.
Dealing with debt
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q3 2023 was $17.291 trillion. Student loan debt was $1.599 trillion and credit card debt was $1.079 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Texas, 15% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 6%.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.