How to negotiate a credit card settlement

Written by ciele edwards
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How to negotiate a credit card settlement
Negotiate credit card settlements yourself. (Jupiterimages/BananaStock/Getty Images)

If the balance you owe on your credit card has become overwhelming and you fear that paying it in its entirety may prove impossible, a credit card settlement is a good option. Paying a credit card settlement company to negotiate with your creditor on your behalf can be expensive, and sometimes even dangerous. Many debt settlement agencies are scams and take your money without properly negotiating your debts--if they negotiate at all. You can negotiate a credit card settlement on your own and put the money you save on debt settlement toward paying off the debt.

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  1. 1

    Call the billing department at your credit card company and request to speak to someone about a credit card settlement. Explain any changes that have recently occurred in your financial situation that will make paying off the full balance difficult. If the representative does not offer solutions, call back and speak to someone else. Credit card companies employ hundreds of representatives and you are unlikely to be assigned to the same person twice. Though they may be uncooperative at first, these companies engage in credit card settlements all the time.

  2. 2

    Mention the possibility of being forced to file for bankruptcy if you cannot negotiate a credit card settlement. Depending on the type of bankruptcy a consumer files, the debt may be discharged entirely. If this occurs, a credit card company may not receive any payment at all for the debt. Your creditors would much rather settle a debt with you for less than the full balance than have the debt included in a bankruptcy filing. Many times the fear of bankruptcy will get the representative talking about credit card settlement.

  3. 3

    Attempt to include the removal of any late-payment notations the credit card company has placed on your credit file in your settlement. Credit card settlement negotiations can encompass all aspects of the debt, not just the balance and interest rate. Also, request that the settled balance be reported to the credit bureaus as "paid" instead of "settled." This will help prevent future lenders from considering you a high-risk borrower and assigning you a higher interest rate on loans.

  4. 4

    Ask that the credit card company agree not to sell the remaining balance of the debt to a collection agency after the settlement is paid. If the balance is sold, this will negate all efforts you put forth to secure the credit card settlement and reduce the debt. Extra fees and charges will be added and the collection agency will place a negative notation on your credit report. This negative notation will damage your credit score substantially.

  5. 5

    Get all agreements in writing. A verbal credit card settlement agreement is not legally binding. In the event that any mistakes are made or the credit card company does not adhere to the terms of the agreement, having written proof of the settlement terms gives you recourse to remedy the situation. If you do not have a written agreement, you are unlikely to be able to convince your credit card company to adhere to the original offer.

  6. 6

    Offer a lump sum payment. A lump sum payment, if you can afford it, grants you much greater leverage when attempting to negotiate a credit card settlement. Consumers who are in need of a settlement are usually struggling financially and are at a much greater risk of defaulting on the debt in the future. A lump sum payment ensures that that the credit card settlement will get paid and a default will not occur.

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