If you’re one of the households relying on credit cards to get through the end of the month, it might seem like you’re in an endless cycle of debt. Fortunately, even if you can’t pay off your credit cards immediately, you still have options, including learning how to negotiate credit card debt.
Credit card debt has risen to $1.03 trillion in the 2023 second quarter, according to the Federal Reserve Bank of New York. So if you have credit card debt, you aren’t the only one.
In this article, learn just how to negotiate credit card debt. Plus find out the different ways you can tackle the negotiation process.
What happens when you don’t make your credit card debt payments?
If you have a very high credit card balance and have missed a few payments, your card company will likely reach out regularly.
If you fail to make minimum payments, you could be faced with late fees and a higher penalty APR. Missing credit card payments is getting a lot more expensive than it used to be, NPR explains.
If you don’t communicate with your credit card company, you could end up in default, resulting in your debt being moved to collections. This could hurt your credit score, making it difficult to get other loans further down the line.
Negotiating your debt with your credit card lender can help you avoid facing default and may be the best way to get out of debt.
Credit card issuers know that when people are in a financial bind, unsecured debt from credit cards tends to be the last paid bill. They may be more willing to consider negotiating your debt so that they get some money back rather than having to sell your debt to a collection agency for pennies.
Choosing a system to help negotiate credit card debt
Wondering how to negotiate credit card debt? There are three main ways that you can negotiate with your credit card company to either decrease your monthly payments or find a solution to help you tackle your debt.
Hire a debt settlement company
One option is to hire a debt settlement relief company to help negotiate your debt on your behalf.
However, the Consumer Financial Protection Bureau explains that this option could be risky, as these companies ask for a high fee and don’t always deliver. Debt settlement companies can charge fees as high as 25% of the settled debt, according to In Charge Debt Solutions, which means you may end up owing more money.
These companies claim they will negotiate with creditors to reduce the debt you owe, but they could leave you in deeper debt than when you started. If you’re considering a debt settlement company, be wary of any company that guarantees they can make your debt go away and charges you before they settle your debt.
Consult a credit counseling company
Credit counselors advise you on your money and debt, helping you figure out a healthy debt management plan. Many credit counseling organizations are nonprofits with certified counselors.
If you’re finding it challenging to pay off your credit card debt, a credit counselor could help you come up with better budgeting and figure out the best way to negotiate your debt. Many will provide free or low-cost services, but they can charge a fee.
Be wary of any counselor who tries to push a debt management plan before they’ve taken the time to analyze your financial situation.
Do it yourself
Another way to negotiate your credit card debt is to reach out to credit card issuers directly. While not all will negotiate with you, it doesn’t hurt to reach out and try.
One of the most common ways of negotiating is asking for a debt settlement or debt adjustment. This is when you pay a reduced amount in full to settle the debt.
Before you start to negotiate or begin a debt reduction strategy, consider any possible consequences, especially as it will affect your credit score. And if you lower or defer your monthly payments, it could take you longer to pay off your debt.
If creditors accept your settlement offer, they will report your debt as paid-settled to credit bureaus, which can impact your credit report for up to seven years.
How to negotiate credit card debt
Negotiating credit card debt might seem intimidating, but it doesn’t have to be. With some organization, you can easily reach out to your credit issuer directly. The worst thing that will happen is that they say no, and you are still where you left off.
Want to learn how to negotiate credit card debt yourself? Keep reading and follow our step-by-step guide.
1. Confirm your account balance
Before you start negotiating with a credit card issuer, it’s essential to have a clear understanding of your current account balance. Go over your credit card statements to get an accurate picture of the total debt you owe.
Confirming your account balance will provide you with a starting point for negotiations and help you set realistic money goals.
2. Figure out the type of debt settlement you want
There are a few different ways to settle credit card debt, each with its own positives and negatives. Some of the most common debt settlement options include:
Lump-sum settlement
In this approach, you negotiate to pay off a portion of your debt in a single payment. The credit card company agrees to consider your debt paid in full with this reduced amount.
Payment plan
Alternatively, you can negotiate a structured payment plan that allows you to pay off the debt over a set period of time. This can make the debt more manageable.
While it may take time to pay off your debt, it can be worth it in the long run.
Workout agreements
A workout agreement is an opportunity for a borrower and a lender to make a contract that changes the terms of the loan. This may happen if the borrower hasn’t been able to pay the loan.
You can keep this in mind as an option if you think that your lender would be willing to work with you.
Hardship programs
Another option to consider is a hardship plan. A hardship program may be possible if you are experiencing a financial struggle and can’t afford your credit card debt.
Experian explains that a hardship program with a credit card issuer may allow a later payment or lower the APR for the card for a time, among other things.
Be sure that you know exactly what you’re agreeing to if you decide to do this. Hardship plans often offer temporary help, but you will still need to pay back the money.
3. Find out if you qualify for relief
Before or during your call with your credit card issuer, ask them about any relief programs they might offer for individuals struggling with debt management. Doing this may help alleviate some of your debt stress.
Some credit card companies have hardship programs to help temporarily lower your interest rate or waive certain fees. This can be a great way to buy some time while working on a more permanent solution.
4. Contact your credit card issuer
Once you’ve decided on the type of settlement you’re aiming for, it’s time to contact your credit card issuer. You can usually find their customer service number on the back of your credit card or on your monthly statements.
Prepare by practicing what you want to say with a friend or family member. Make sure to have your account information ready when you call.
5. Define the terms of your payment plan or debt solution
If you want a payment plan, be prepared to negotiate the terms.
Explain your financial situation honestly and propose a payment plan that you believe you can realistically adhere to. The credit card issuer could be willing to work with you to create a plan that suits both parties.
If you don’t want a payment plan but have another option in mind, like a lump sum payment, make sure you know exactly what you’re agreeing to first.
6. Review
After your initial conversation, don’t just wait for a response. Try following up with the credit card issuer to check on the progress. They may come back to you with a number or payment plan larger than you want to pay, so be prepared to renegotiate again.
Persistence can show your commitment to resolving the debt and might encourage them to take your case more seriously. Make sure to keep the dialogue civil and respectful during the negotiation process.
7. Get everything in writing
Once you’ve reached an agreement with your credit card issuer, getting the terms in writing is crucial.
This protects both parties and ensures that there’s a clear record of the agreement. Ensure the document includes details such as the settled amount, payment schedule, and other relevant information.
Expert tip: Make a plan for what to ask for when you negotiate your debt
When negotiating your credit card debt, make sure you are clear about what you want, whether that’s lower payments, a debt settlement plan, or debt relief. Be respectful and persistent while negotiating.
It wouldn’t hurt to write down all of your questions and any ideas you have about debt repayment prior to speaking with the credit card issuer. You can also take notes as you talk with them, so you remember everything important that you discuss.
Keep in mind that settling your debt can impact your credit score so make sure it’s the best way to tackle your debt.
Be aware of credit card debt scams
Unfortunately, people struggling with financial hardship can attract scammers. These scammers often offer quick fixes that sound too good to be true.
Always verify the legitimacy of any debt relief agencies or services before sharing your personal and financial information.
If something sounds fishy or too good to be true, it probably is. Watch out for red flags of debt settlement scams, such as unsolicited debt relief robocalls, requests for upfront payment, result guarantees, or a general lack of clear explanations about the debt settlement.
Does negotiating debt hurt credit?
Yes, negotiating debt can hurt your credit score. That’s because creditors report any debt settlement to credit bureaus as paid-settled.
This tells other creditors that you weren’t able to pay off your credit in full, and it can stay on your credit report for seven years, states Lending Tree.
What percentage will credit card companies settle for?
When learning how to manage credit card debt, the percentage that credit card companies settle for varies, but in most cases, it’s between 10% and 50% of the loan’s original value, Investopedia explains.
In some cases, according to Experian, you need to pay as much as 80% of the debt owed.
What percentage should I offer to settle debt?
A good rule of thumb for the percentage you should offer to settle the debt for is 30% to 50% of the original credit amount.
However, the amount that the issuer accepts will vary on several factors, including the total loan amount and how long you’ve had the credit card.
How much does the average credit card debt settle for?
On average, credit card debt settlements cover 10% to 50% of the original debt amount, though this can vary.
Remember, though, that creditors are not obligated to accept an offer and reduce your debt, so you may end up having to settle for more.
Is it possible to negotiate a credit card debt settlement myself?
Yes, you can negotiate a credit card debt yourself.
In many cases, you’ll need to offer a lump sum, so once you have enough set aside, you can contact your creditor directly and make an offer.
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Take charge of your finances by negotiating your credit card debt starting today!
Now that you understand how to negotiate credit card debt, you can take proactive steps toward regaining your financial wellness. By knowing how much you owe, deciding on the type of debt settlement you want, and being persistent, you can confidently reach out to your credit issuers.
Remember that open communication, honesty, respect, and persistence are key elements of successful debt negotiation. Overcoming debt and managing your money is a huge part of achieving success in life, and you can do it!
