- Review the general debt collection process.
- Examine specific facts about how Citi reacts to debt consolidation programs.
- Use the free Debt Coach tool to compare your various debt relief solutions and your costs.
My Credit Card Debt is Out of Control. Citi is My Largest Creditor. Is There a Citi Debt Consolidation Program That Can Help Me?
My credit card debt is out of control. I owe about $28,000 in total. My biggest debts are with Citibank. I have two Citi cards; I owe $7,500 on one and $7,000. I was late on my payments a few months ago by only a couple of days and my interest rates were hiked to close to 30%. I can't keep up. Can you recommend a Citi Debt Consolidation program to help me get out of this situation? I feel like I will never get out of debt.
Thank you for your question about your options for resolving your credit card debt, specifically your Citi credit card debt, and whether there is a Citi debt consolidation option that will help you.
Citi is a full service bank, offering a variety of services including checking and savings accounts, credit cards and a Citi mortgage department. Citi also offers unsecured personal loans, from $500 up to $50,000, with fixed rates ranging from 10.49% APR to 25.49% APR. You can apply for a debt consolidation loan or use the funds for some other need. It takes good credit and strong income to qualify.
Contact one of Bills.com's pre-screened debt providers for a free, no-obligation debt relief quote.
Stay in Touch with Your Creditors
When you are struggling to pay your creditors, staying in contact with your creditors is important. You have a better chance of getting some flexibility from your creditors if you reach out to them before you miss a payment than if you wait until after you miss one. In your case, you should call Citi and your other creditors, to see if they are willing to put you into a financial hardship program. This won't solve your debt problem, but it can give you some temporary relief. Ask for an interest rate reduction or permission to make a smaller than normal minimum payment, so you can avoid being hit with late fees or a sky-high hike in your interest rates.
If your credit is in good standing, a balance transfer offer can be a good debt consolidation solution. Your goal should be to move as much of your high interest debt as possible into a lower interest rate account. Balance transfers usually come with a low, introductory "teaser rate" that moves to a higher rate, after the introductory period ends. It's your responsibility to know how long the low-rate period lasts and how high the rate will be after the low-rate period ends.
If you miss payments on your Citi accounts or with your other creditors, there are consequences. Your interest rate will be hiked and you will likely be charged late fees. You will end up in collections, if you are unable to work out a solution with them and reestablish consistent monthly payments.
All creditors do not treat every delinquent account the same and even individual creditors can legally be more aggressive in their collections with some customers than others.
There are some basic strategies and practices, however, that Citi and other creditors employ with their delinquent customers:
- Most creditors use an internal collection department at the start of the collections process. If internal collections does not succeed, the accounts are usually referred to a law office for collections.
- Some creditors have in-house legal departments they use to collect on the debt. This is less common than it used to be.
- Most creditors refer account to outside legal collections when they are between six and nine months delinquent. How long it takes depends on the creditor.
- Creditors apply different standards for identifying the accounts they pursue by legal collections. The account balance and the collection laws that apply for the state in which the customer resides are important. If a state does not allow its residents to have their income garnished, such as the case in Texas, North and South Carolina, and Pennsylvania, most creditors are less likely to engage in legal collections.
- A person with no assets and income that is off limit to garnishment, such as Social Security income, is less likely to face legal collections than a person with strong assets and income that can be garnished.
- Some creditors pay close attention to your specific account activity, when deciding whether to pursue legal collections. For instance, Citi, Bank of America, and Chase, pay less attention to whether you had a recent balance transfer or cash advance than do American Express or Discover.
- If your creditors are unable to collect even after your debt has been sent to a law office, they are likely to sell the debt to a collection agency that purchases debt. This usually happens about 18 - 24 months into the collection process.
If you can't work out an acceptable solution on your own with Citi or your other creditors, your best debt relief solution may be to hire a professional debt relief organization, such as a credit counseling firm or a debt settlement firm.
Before you choose a specific debt solution, it is very useful to understand how your specific creditors work with their customers. That way, you can plan the most effective strategy for getting out of debt.
Bills.com’s editorial staff has done extensive research, in order to provide you with some specific facts about the way Citi deals with accounts its customers enroll in debt relief programs.
Citi Debt Consolidation & Credit Counseling
If you enroll a Citi account in a credit counseling's debt management program, you should expect:
- A monthly payment that is 2.32% of your account balance
- A minimum monthly payment of $20
- An interest rate of 9.9%. If your current rate is at or below 9.9%, not only will you not reduce your rate in the DMP, but your rate will be hiked to the 9.9% rate. If your Citi card has a rate less than 9.9%, see if you can keep the card out of the program. Most DMPs require you to enroll all your cards, but you should try to keep out any card where your rates will rise and not fall.
Citi & Debt Settlement
Debt settlement is a debt relief solution you should consider, if you are experiencing a serious financial hardship. Debt settlement is an aggressive form of debt relief that is designed to get you out of debt in 24-48 months, while avoiding bankruptcy and with far lower cost than paying your minimum payments or using a credit counseling program’s DMP. In order for your debt settlement program to succeed, you have to make the monthly program payment, which is usually significantly less than the current monthly minimum payments that your creditors require and also less than DMP’s monthly payment.
Bills.com reviewed hundreds of settlements reached that professional debt settlement negotiators reached for their clients’ Citi accounts. The average settlement negotiated was just over 50% of the balance that the clients owed when the accounts were enrolled in the settlement program.
Is Hiring a Debt Settlement Firm Sensible?
There is nothing stopping you from negotiating settlements directly with their creditors, but many people find that the best solution is to pay a fee to hire a reputable and experienced settlement company, especially when they pay no up-front fees to enroll in the right debt settlement program. Professional debt settlement firms have experienced negotiators who know far better than you how the creditor behaves and the most effective way to prioritize settlements with your various creditors. The best settlement firms have been in business for years and have developed working relationships with many creditors that allow them to settle a number of accounts for different clients at one time, saving clients money and helping the creditor clear out multiple delinquent accounts at one time.
No Up-front Fees
You don't have to pay any fee to a settlement company before your account is settled, if you work with the right firm. To avoid up-front fees, Bills.com recommends choosing a debt settlement firm that is a member of the AFCC (American Fair Credit Council) and has debt consultants that are accredited by the IAPDA International Association of Professional Debt Arbitrators).
Make sure to take the right steps to avoid debt consolidation rip-offs.
Citi & Legal Action
Citi has a reputation as an aggressive creditor, likelier to pursue legal collections that other creditors. Citi usually waits 6 months after the first delinquency before referring its accounts to outside legal collections. Citi does not send every account that is 6 months late to collections and even with an aggressive creditor like Citi, only a small percentage of accounts end up with Citi suing the customer.
Citi examines the size of the outstanding balance,the state-specific collection laws for the customer's state of residence, and whether the customer's employment history and assets make collection likely, when deciding whether or not to sue a customer.
Bills.com recommends that you look into all your debt relief options, before making any decision. Carefully weigh the pros and cons, in order to weigh all the pluses and minuses that come with each solution.
Take advantage of Bills.com's freeDebt Coach tool. Debt Coach received positive reviews from both the New York Times and from CNN. Debt Coach makes it easy to compare all your available debt solutions, taking into account the goals and priorities that you specify, and providing you with a realistic estimate of how long it takes to get out of debt and 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 Q4 2022 was $16.91 trillion. Student loan debt was $1.60 trillion and credit card debt was $0.99 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
Collection and delinquency rates vary by state. For example, in Nebraska, 16% have student loan debt. Of those holding student loan debt, 5% are in default. Auto/retail loan delinquency rate is 2%.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.
You can compare the results a credit counseling firm's DMP will produce with what a debt settlement firm can do for you.