Sometimes negotiating a settlement with a creditor is an option to which some credit card companies will agree. What this means is that a creditor may be willing to accept less than the full balance you owe on a credit card debt. However, most creditors are not going to agree to this right away, therefore, prepare to be persistent. Remember, too, that you credit score may be affected even if a creditor agrees to write off a portion of the debt. Another alternative is to seek a lower interest rate as a way to reduce the monthly payment.
Step 1
Keep any offers you receive from other credit card companies. These could give you some leverage when negotiating with your credit card company. If your card issuer knows that you have had better offers it may be more willing to negotiate rates and terms. Getting a lower interest rate can lower the minimum monthly payment due.
Step 2
Contact the credit card company at the phone number printed on the back of the card. Ask the customer service representative to transfer you to a supervisor. Most times the person who answers your call has no authority to negotiate. You want to talk to someone with whom you can work out a settlement, although you may actually be referred to a number of different people throughout the process.
Step 3
Let the person to whom you are speaking know that you have received better offers from other credit card companies. If you are a good customer, the card company may not want to lose your business to one of its competitors. Make it known that you will transfer your balance to a card offering a lower interest rate and then will close the account you have with your current card issuer. This may get your call transferred to someone whose job it is to offer you an attractive deal so that you are willing to keep your account open.
Step 4
Try to negotiate a partial settlement if you are having major money woes. According to the National Association of Consumer Advocates, this approach may not be easy but there are different solutions available to consumers (see Reference 3). Making a lump sum settlement involves paying less than the full balance owed. Ask what amount you must pay to satisfy the bill. Under a workout arrangement, the card issuer may stop assessing late fees and cut the interest rate until you have paid the balance. A major disadvantage is that this could negatively affect your credit score.
Step 5
Log any telephone conversations you have with a creditor. Record the date, time, name and title of the person to whom you speak, in addition to jotting down a brief summary of what you discuss. Talk to the person honestly and explain what events are responsible for the change in your financial situation if you are trying to negotiate a reduction in your credit card debt. If you are looking to propose a settlement deal, know how much you can afford to pay before you make the telephone call. Sometimes you can get a card company to write off additional interest and late fees and accept the original principal as a payoff.
Step 6
Get any agreement in writing before you make a payment. Ask that the agreement include the details of how the account is to be paid and when. This is the best way to protect yourself if incorrect information about your account is reported to the credit bureaus later on.
Tips and Warnings
- Creditors are often willing to negotiate payment of unsecured debts such as credit card balances, primarily because there is no guarantee that the creditor will be able to get anything from you if you don't pay. If your credit card account goes to collection, even if you negotiate a deal to pay the debt, a paid collection is just as negative on your credit report as an unpaid account. Once you negotiate a payment to settle the debt, you need to try to negotiate your credit rating as well, if not with the collection agency than with the original creditor.
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