Credit card debt can accumulate to a point where you are unable to pay back the debt. As your credit line defaults, you can wreak havoc on your credit rating if you do not work with the credit card company to settle the debt. Since the credit card company wants to get paid, it is likely to negotiate with you to receive a cash payment at a lesser amount than the current balance.
Step 1
Set up negotiations before the account balance is sent to a collections agency. Being put into collections can cause your credit score to go way down. Since the collection agency's job is to get as much money from you as possible, it might be less willing to negotiate the debt.
Step 2
Call the customer service line on the back of your credit card. Ask to speak to an account representative about settling your defaulted credit line.
Step 3
Let the representative know you wish to settle the debt with a lump sum payment. Start by offering to pay 25 percent of the amount owed. The representative is likely to present you with a counteroffer that is much higher than you want to pay. You may have to go back and forth until you settle on an agreed amount. According to the Debt Steps website, it is not uncommon for a creditor to agree to accept 50 percent or less of the amount owed.
Step 4
Make a promise to pay the agreed upon amount immediately. The credit card company is only likely to extend the offer for a limited time, typically anywhere from one to three months. If you don't have the money to make the cash payment, you need to work out another arrangement.
Tips and Warnings
- Keep in mind that negotiating a credit card settlement can adversely affect your credit score. The creditor is likely to report the number of days of delinquency as well as the cash amount that was paid to settle the account. Remember that the charge off is treated by the IRS as taxable income and you need to report the amount on your income taxes.
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