11 Tips on Successfully Negotiating Credit Card Debt

by Violet WillettDecember 22, 2023
11 Tips on Successfully Negotiating Credit Card Debt

If you’re sinking in credit card debt, like most Americans, and can’t settle your debt- you could also consider negotiating with the credit card company. We consulted the finance experts and here are their top pieces of advice for anyone looking to negotiate their credit card debt;

To successfully negotiate a debt settlement plan, it is important to keep a few things in mind. Don't settle for something you can't live with, and never offer more than you can afford to pay back on your schedule. 

  1. Settle for Something You Can Live With

When you're negotiating a settlement plan, it's imperative to remember that the whole point is to pay back what you owe and then move on. If a collection agency calls you today offering you a 50/50 deal, a payment plan of $100 a month for two years, say no. You might be tempted because it seems like an easy solution and your debts are adding up. But, you'll be stuck in the same situation you're in now for another two years with nothing to show for it.

Some people get so desperate for a solution; they’ll take the first offer that comes along just because it's better than what they currently have. Don't do that. Even if you're offered 30 percent off and a payment plan that allows you to pay within six months, it may not be a good deal. 

Remember, the worst that could happen if you don't agree to their terms is that they'll sue you. If all you can do is promise to pay something, make sure the payment amount is something you can afford and the timeframe is reasonable. 

For instance, if you only make $50,000 a year, it wouldn't be wise to agree to pay $700 a month for four years. That's not just a lot of money and an unreasonably long time for you to keep up with the payments; it will also put a substantial dent in your monthly budget. 

Benjamin Stenson, Advisor at The Norsemen

  1. Present Yourself

If you’re at the point where you’ve to negotiate a settlement for credit Card Debt, then you should create a doc that lists your assets, available money, monthly income, and monthly living expenses. I’ve been there, done that. This doc has helped me present a legitimate reason why the company should offer me a settlement for less than what I owe. Sincerity is the key here and I once explained my situation to the company that their debt was creating an un-do hardship and stress. So, we negotiated the terms and helped me in preventing a complete loss.

  1. Always Agree

The company most likely offers a payment plan and you never say no to it! I once made the mistake of declining it and the offer went down the drain. Once they offered me a plan, I agreed, and then told them about my monthly income. I told them that I could pay the “Y” amount in one lump sum. I started lower than what I could afford and this allowed some room for Negotiation.

Luke Zhang, Founder Dunk or Three

Based on our experience negotiating $17.3mm of debt, there are two ways to save on your credit card bills by negotiating with your company: lowering your APR and getting past interest and fees refunded. 

  1. Lowering Your APR

You can get your APR reduced if your credit has improved by asking your credit card company to review your rate. If you've had a financial or medical hardship, your credit card company also has hardship programs that will significantly lower your rate that you can take advantage of. Both these options have the opportunity to cut your rate 5% or more, which on $10K of debt is $500+ of savings a year.

  1. Past Interest and Fees Refund

You can also save hundreds getting past interest and fees refunded. Getting late fees waived is easier, but you can also get past interest in previous months refunded. We've been able to save several clients $1,000+ in past interest that significantly lowered their debt levels. Based on our data, negotiating your credit card debt can lower your overall debt by 2.26%. It's simple and risk-free, but you may want help from an expert like BillSmart. 

Mark Chen, the Founder and CEO of BillSmart, a bill negotiation service for credit card debt and phone/cable bills.

The biggest reason creditors are willing to settle debts owed is that the alternative will leave them with little or no repayment. If someone is experiencing hardship and cannot make their payments, they will explore all options, using limited funds to eliminate their debt. 

  1. Seek Bankruptcy

If someone is facing significant debt with multiple creditors, they may simply seek bankruptcy relief to eliminate that debt. In most Chapter 7 cases, creditors receive nothing. In Chapter 13 cases, they may receive pennies on the dollar over a period of three to five years. Creditors will take something over nothing, especially if they can get paid over a shorter period.  

  1. Creditors Will Want To See A Clear Hardship

Often a series of missed payments will demonstrate that, but I do not suggest skipping payments in the hopes of a better settlement. One can document hardship in a number of ways, but a detailed letter usually works. Once a creditor sees the hardship, they may entertain settlement talks. The key in presenting a hardship is to show that you are offering to pay what you can and not just looking for a sweet deal.  

  1. Offer a Lump Sum Payment

In my experience, offering a lump sum payment will lead to a greater discount on the current balance. Even if a creditor does not offer as large of a discount as you want, you may be able to negotiate a repayment plan rather than a lump sum payment. 

  1. Retain an Experienced Attorney

Finally, retaining an experienced attorney to assist you in negotiating may lead to even greater savings. If a creditor sees that an attorney has been retained, they may be more inclined to work with a debtor fearing bankruptcy. As a bankruptcy attorney, if a creditor looks me up, they will see that the threat of bankruptcy may not be a bluff.

Matthew D. Zimmelman, Esq.  attorney in New York with over ten years of experience helping individuals and small businesses eliminate their debt. 

  1. Make A Call To Your Credit Card Company

If you want to manage your discussions, contact your credit card company and ask to talk with someone in the debt settlement, loss mitigation, or hardship department; a typical customer care representative won't be able to approve your request. Explain your circumstances and make your offer once you've been connected with someone who can help you negotiate. Maintain a pleasant yet forceful demeanor.

Alan Harder, Mortgage Broker, AlanHarder.ca

  1. 6 Steps to Negotiating
  • Step One: Know Your Goal

When negotiating with creditors, you're going to need to know your goal. The creditor's goal may not be to negotiate; they may just be trying to get their hands on their money. It's up to you to decide which side of that fence you want to sit on.

  • Step Two: Know Your Options

Once you know your goal, it's time to look at the options. These are questions that may come from your lawyer or an attorney that you hire. They will answer them, but you need to know where they stand before deciding whether their advice is worthwhile.

  • Step Three: Know Your Creditors

Once you've decided on the options, you need to find out who your creditors are. You can do this in several ways. You can use your credit report, look them up in the yellow pages, or even inquire about their terms on their website. The more information that you have, the more likely you are to reach an agreement.

  • Step Four: Make Your Position Clear

No negotiation takes place until both sides agree to the rules of engagement. In this case, that means that you and your creditors agree to a set of terms (which can be negotiated at will) that will govern your settlement agreement. Make sure that, no matter what these rules are, you can live with them.

  • Step Five: Take Your Time

Once you've gotten as much information as possible, decide who you want to negotiate with. This may seem like a quick decision, but it is one of the most critical steps in the process. You should take your time and make this decision carefully.

  • Step Six: Negotiation

Once you have your plan, it's time to put it into action. You may want to negotiate over the phone, which is fine as long as there is a record of what has been said and agreed upon. If that's not possible, you will need to write down the terms of the agreement so that everyone involved is clear on what is being discussed and agreed upon.

Katherine Brown, the Founder & Marketing Director of Spyic

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