Mary Grace McCormick, Credit Writer
To negotiate credit card debt for less, start by figuring out how much you owe and how much you can pay, then come up with a plan of what to ask for, and trade offers with your creditor until you come to an agreement. Learning as much as possible about how to negotiate credit card debt ahead of time is the best way to increase your chances of coming out on top. There are just a few simple steps to follow.
Here’s how to negotiate credit card debt:
- Figure out how much you owe. You should have a clear sense of what debts you have and to whom you owe them.
- Determine how much you can reasonably pay. Think about this in terms of both a lump sum and monthly payments. Also, figure out what it would take to bring your account(s) back to good standing.
- Decide what type of resolution you want. When you’re overwhelmed by debt, you can pursue a few different solutions with your creditors, including debt settlement, a forbearance program (if your hardship is temporary), and debt management. Debt settlement is the process of negotiating repayment for less than the amount that you owe; the remaining debt is forgiven. A forbearance program is a good alternative if you’re experiencing financial hardship due to a temporary loss of income and want relief until you can repay the full amount. Debt management is a restructuring of your current debts under a more favorable rate.
- Research other people’s experiences with the party handling your debt. You can figure out who is handling your debt by referring to the most recent notice you received. This research will give you an idea of what has and has not worked with your creditor or debt collector. Make a list of successful methods that you can apply yourself.
- Come up with a plan for negotiation. Make sure you have both an initial offer (your best outcome) and a final offer that you’re not willing to go beyond. Do a bit of rehearsing, playing out various scenarios so you’re prepared for any questions and counteroffers.
- Contact the party handling your debt. Explain why you’re finding it difficult to make payments, emphasizing any factors out of your control, like the loss of a job or sudden medical bills. Express your desire to pay what you can, just with a little flexibility.
- Present your offer. Explain why it’s mutually beneficial. Listen to their counteroffers, if any. Always be polite, as friendliness can go a long way in negotiations.
- Get an agreement in writing. If you can come to a compromise, make sure your issuer sends you a signed written statement agreeing on the new terms.
Every person’s situation is different, so it’s hard to give specific tips on the ideal solution for you without knowing how much debt you have and what’s preventing you from paying it. But as long as you make a well-thought-out plan and communicate with your creditor, your chances of success will definitely improve.
How often does credit card negotiation work?
Success rates vary by the type of debt solution. Debt settlements are only successful about 10% of the time since creditors have no obligation to settle. They only agree to a settlement when it’s their only option of receiving money back.
The success rate for debt management is around 20%; the success rate here is low because individuals who choose these plans must have the discipline to stick to a payment plan over 3-5 years. Additionally, debt management programs require you to enroll all of your debt, so it can be difficult to reach an agreement that all of your creditors agree on.
You’re more likely to experience success with a forbearance program; creditors would rather lose a little money in the short-term while you get back on your feet than have you default on your entire debt.
It’s important to note that if you’re dealing with an old debt, or there’s any doubt about the accuracy of your balance, be careful not to admit that you owe the amount in question or to make any new promise to pay. Doing either could reset the statute of limitations, giving the debt collector a better chance of suing you and winning.
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Kevin Pebb, Member
Always make sure the amount they say you have to pay is correct before agreeing to anything. Oh, and don't agree to anything over the phone. Make sure you have something in hand in case they try to back out.
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