How to Negotiate Credit Card Debt
Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders, all opinions are our own.
If you’re drowning in credit card debt, you may be able to settle with your creditors for less than you owe. Learn how to negotiate credit card debt. (Stock)
There’s no doubt about it — Americans love their credit card. Specifically, they love using these credit cards.
The average consumer had just over $5,200 in credit card debt in 2021, with credit card debt in the United States totaling $784.5 billion, according to Data from Experian.
Since high credit card indebtedness often creates a significant financial burden on households, what can credit cardholders do to alleviate this debt? One option is to negotiate your credit card debt to a lower level than you currently owe.
Here are some options for negotiating credit card debt, as well as other ways to manage your debt.
Consolidating high-interest debt with a personal loan is one way to manage credit card debt. Credible, it’s easy to view your prequalified personal loan rates from various lenders.
Credit card companies can and do negotiate card debt with customers. To start the negotiation process, contact your credit card issuer directly to discuss your options.
Keep in mind that negotiating your credit card debt will likely have a negative effect on your credit. But any credit you gain from negotiating a credit card will likely be less damaging or lasting than other options, such as default or bankruptcy.
You have three main options for negotiate credit card debt. Which one is best for you will depend on your particular financial situation.
When the going gets tough and you lose a job, get sick, or lose the ability to pay your credit card debt, it’s worth asking your credit card company if they offer a hardship plan.
With a credit card hardship agreement, your credit card issuer can suspend your payments or reduce your interest for a specific period of time. Once the crisis is over, you can start paying your credit card debt again according to the original terms set out in your credit card agreement.
- Best for — Those who have fallen on hard times and need to temporarily suspend credit card payments
- Disadvantages — Can be hard to find and even harder to negotiate, as not all creditors offer a hardship option
Lump sum payment
Another option if you’ve fallen behind on your credit card payments is to negotiate a lump sum settlement with your credit card company.
For example, if you owe an overdue balance of $5,000 on your credit card and let your card issuer know that you can pay $4,000 to settle the debt immediately, the credit card company can approve the settlement – as long as you follow through and make the agreed payment.
Note that your credit score may be affected by a lump sum payment agreement. Credit reporting agencies may record the payment as a partial payment and you will not pay the full amount owed on the credit card debt. Settled accounts can remain on your credit reports for up to seven years, but your score may recover.
- Best for — Those who have cash on hand to settle large debts
- Disadvantages — If you’re in a cash flow rut, it’s not easy to come up with thousands of dollars in cash to pay off a lump sum debt
You may be able to talk to your credit card company about a practice agreement, where your lender will renegotiate your terms. Credit card providers may agree to lower your interest rate or minimum payment amount as long as you meet the new payment terms.
By “doing” a deal, credit card companies get some of their money back.
- Best for — Those who need time to get back on their feet financially
- Disadvantages — Your lender may not want to negotiate a reorganization agreement
If you’re ready to negotiate your credit card debt, follow these steps:
1. Know where you stand
Don’t go into a credit card negotiation without knowing where you stand. Make sure you know the total amount of your credit card debt, your interest rate, and the minimum monthly payment amount. Read the fine print of your card contract before contacting your credit card company. This will let your card issuer know you’re serious about a deal and can improve your chances of a successful negotiation.
2. Check your options
Review the different credit card settlement options – a hardship plan, lump sum settlement, or sparring agreement – and decide which is right for you. If in doubt, consider talking to a credit counselor who can point you in the right direction.
3. Contact your credit card company
Once you have your credit card trading strategy in place, contact your credit card issuer and ask about their debt settlement or loss mitigation service. In general, a customer service representative is not the best person to discuss a settlement agreement with – you will need to speak to a manager or a debt settlement specialist.
4. Take notes and write everything down
Take thorough notes and use this information as leverage to make your point.
If you reach an agreement, ask your credit card company to officially confirm the terms of your negotiation in writing, either by e-mail, fax or by sending you a letter. Once you receive the documentation in writing, read it carefully. If anything seems off, contact your credit card company to resolve the issue.
If you’ve decided that a personal loan to consolidate your credit card debt is right for you, visit Credible for view your prequalified personal loan rates in minutes.
Why creditors may be willing to negotiate
Credit card companies may be willing to negotiate your credit card debt for several reasons :
- Something is better than nothing. Credit card companies are open to negotiating debt because getting some of their money back is a better option than getting nothing back.
- They don’t want to lose you as a customer. Good customers who are struggling financially can bounce back and start making regular payments again. Card issuers know this and are often willing to work with customers with temporary cash flow problems.
- No warranty options. Since credit cards are an unsecured form of credit that does not require you to post collateral, a credit card company may be willing to negotiate with you as they are unable to take collateral if you do not make your payments by credit card. .
If you are unable to negotiate your credit card debt or if your card issuer does not offer any settlement options, there are other ways to manage credit card debt at high interest.
Balance transfer credit card
If you have high-interest credit card debt but decent credit, you may be able to transfer a high credit card balance to a new credit card with a 0% introductory APR. By transfer your credit card debt to a new cardyou can pay off your existing debt without accruing interest.
But keep in mind that if you don’t pay off the balance on the new card in full at the end of the promotional period, you’ll start earning interest at the card’s regular rate. It is important to consider some pros and cons of a balance transfer credit card before signing up:
- Pro — With no interest payable during the introductory rate period, all your card payments go towards paying off the balance, giving you the opportunity to pay off your debts faster.
- Con — Balance transfer card transactions can come with a hefty balance transfer service fee, often 3% to 5% of the transferred amount.
Personal loan for debt consolidation
Another option for paying off credit card debt is to take out a Personal loan. You can pay off your credit card debt with the funds from the loan and then you will start making payments on the debt consolidation loan. These loans typically come with lower interest rates than credit cards, which can help you save money over time.
- Pro — You will have fixed monthly payments and a fixed end date for the repayment of the loan.
- Con — Once you use a personal loan to cover your credit card debt, you still have to repay your personal loan. Make sure monthly payments are within your budget so you don’t miss any payments, which could hurt your credit.
Credible allows you compare personal loan rates from multiple lenders, all in one place. And it won’t affect your credit score.