To negotiate credit card debt for less, first figure out how much you owe and how much you can pay, then determine your ideal result and what other solutions you might be willing to accept. Finally, discuss options with the card issuer (or debt collector) until you come to an agreement. You can negotiate for an interest rate reduction, a settlement, forbearance or other options.
The average U.S. household has over $10,000 in credit card debt – so if you’re anything like the average, negotiating your debt can potentially save you a lot of money if you go about it the right way. 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.
What Is Credit Card Debt Negotiation?
Credit card debt negotiation refers to having good-faith discussions with your credit card company to reduce your debt or make it easier to pay. Such discussions benefit both parties because they ease your financial burden while helping the credit card company get paid sooner.
Through negotiation, you may be able to settle for a portion of your debt or get on a payment plan with a reduced interest rate or lower monthly payments. In cases of financial hardship, you might even be able to avoid making payments temporarily.
Now that you’re familiar with the basics, let’s go through the steps for negotiating credit card debt in detail, from getting your bearings and figuring out what kind of solution you’re aiming for to actually contacting your credit card issuer and getting an agreement.
How to Negotiate Credit Card Debt in 8 Steps
1. Figure out how much you owe.
You should have a clear sense of what debts you have and to whom you owe them. In addition, you should know what the APRs are on those debts, so you have an idea of how quickly interest is accruing.
You can find this information by looking at your most recent credit card statements or logging in to your online account. If you’re having trouble finding all the details, you can always call the number on the back of your card to confirm them with customer service. Your credit report, which you can access for free on WalletHub, will also list the latest balances reported to the major credit bureaus by your credit card companies.
2. Determine how much you can reasonably pay.
Think about this in two ways: What can you afford to pay in a month, and what could you afford to pay all at once in a lump sum payment? This can help you decide whether you want to push to settle for a portion of your debt or ask for a lower monthly payment/interest rate.
Also, if you are not current on your accounts, prioritize figuring out what it would take to bring them back to good standing. As long as you are behind on payments, your credit score will continue to go down every month, so avoiding further damage is important.
3. 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. Each works best for different situations, so you may want to discuss multiple solutions with your credit card company to find the best one.
4. Research other people’s experiences.
Check online for other people’s stories about how they handled the negotiation process with your credit card issuer or debt collection agency. You can read user reviews on WalletHub or threads on credit card forums, for example.
This research will give you an idea of what has and has not worked in the past. Make a list of successful methods that you can apply yourself.
5. Come up with a plan for negotiation.
Make sure you have both an initial offer (your ideal 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.
6. 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.
Credit card companies are surprisingly willing to work with you if you take the time to ask. For example, 29% of cardholders who have asked for an interest rate reduction have received it, and 58% have received a fee waiver, according to our customer service survey.
7. Present your offer.
Explain why the plan you came up with is mutually beneficial for you and the debt collector. For example, it might help you financially while allowing them to receive on-time payments/immediate cash, neither of which may be possible without an agreement.
Listen to their counteroffers, if any, and try to haggle until you get a deal you feel works for you. Always be calm and polite, as friendliness can go a long way in negotiations.
8. 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. This will ensure that the agreement holds up legally in the future.
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.
Negotiating Credit Card Debt Yourself vs. With Professional Help
You could hire a so-called debt negotiation specialist to contact your lender and negotiate on your behalf. This might seem tempting at first since you don’t have to do the work and you’ll have someone who negotiates for a living arguing on your behalf.
However, there are several reasons why it’s better to simply negotiate credit card debt yourself:
- It’s cheaper. It costs nothing to negotiate with your credit card company yourself. When it comes to professionals, there might be lawyers or nonprofits that give free consultations or counseling, but they likely won’t do actual negotiation for free. And companies that explicitly advertise negotiating charge large fees to do so.
- You avoid scams. Unfortunately, some companies that say they’ll negotiate with your credit card company are nothing more than scams trying to get your money. Doing the work yourself eliminates the possibility of falling for one of these schemes.
- Your credit score may decrease less. Many companies that specialize in negotiating debt are specifically for people who want to try to reach a settlement. Such companies will usually instruct you to withhold payments from your credit card company until a settlement is reached, which can cause a lot of damage to your credit score.
All in all, it’ll save you money to negotiate your debt yourself, even if it’s a bit more work than hiring a professional. But if you do hire someone, look at their credentials and reviews first to make sure they’re trustworthy.
When Should You Negotiate Your Credit Card Debt?
You should negotiate your credit card debt if you’re having trouble making your payments and you can’t easily solve the problem by cutting out spending on luxuries from your budget. Being proactive is important so you can correct any problems before they get too serious.
If you’re not yet late on any credit card payments but you’re experiencing sudden financial hardship, for example, you can proactively ask your credit card issuer for temporary forbearance, which can prevent you from owing late fees for missed payments.
If you’re already late on payments, coming up with a plan to get current as soon as possible is essential. Otherwise, you can end up wrecking your credit score.
How the Statute of Limitations Affects Negotiations
Keep in mind that the statute of limitations for credit card debt could be as short as three years or as long as 15 years, depending on the state in which you live, and its starting point is the date of your most recent payment. If the statute of limitations has almost expired, you may want to simply wait it out so you don’t have to pay. Making a payment, signing an agreement to pay or even acknowledging that you owe the debt can “re-age” your debt and reset the statute of limitations. That gives the debt collector a better chance of suing you and winning.
If your credit card company or a debt collector successfully sues you for the money before the statute of limitations expires, the statute will not absolve you of your debt, and they’ll have an unlimited amount of time to collect. Plus, most people’s debts won’t be close to the statute of limitations’ expiration, so negotiation is usually a much better option.
Credit Card Debt Negotiation Outcomes
Debt Settlement
Credit card debt settlement is a process where you negotiate with your credit card issuer to reduce the total amount you owe. Typically, you offer a lump sum payment that's lower than the full debt but that you can pay immediately, and the creditor forgives the remaining debt.
This approach has several downsides:
- To settle your debt, you must be delinquent on it, if not already in default, and that will cause a big drop in your credit score.
- Both late payments and default will stay on your credit report for seven years.
- Forgiven debt (principal, but not interest) is considered taxable income, so you may have to fork over more money to the IRS at tax time.
- You may have to deal with collection efforts and legal action before you come to a deal.
If you pursue debt settlement, you should avoid working with for-profit debt settlement companies, which may charge you large fees in return for their services and make the process not worthwhile. Plus, these types of companies only successfully settle about 55% of accounts, according to the American Fair Credit Council.
Forbearance
Credit card debt forbearance, also known as a “hardship program,” is a temporary relief option offered by credit card issuers if you are facing financial hardship due to things like a sudden job loss, medical expenses or a death in the family. It allows you to pause or reduce your monthly payments for a specified period, typically a few months. During this time, interest may still accrue, but late fees and penalties are often waived. Forbearance provides short-term relief, allowing you to get your finances back in order without having to worry about credit card payments.
While forbearance can help you avoid being considered late or delinquent, and stop your credit score from dropping as a result, there are still some consequences. Your debt load may still grow, for example, and an increased debt load can have a negative impact on your credit score.
An alternative to pausing your payments altogether is to ask for a temporarily reduced interest rate or lower minimum payments.
Debt Management
Debt management is the process of creating a new repayment plan with your credit card issuer or debt collection company, without having the existing debt forgiven. Your new plan may include a lower interest rate, lower monthly payments, or both.
The main advantage of debt management is that the new plan will hopefully help you avoid paying late or missing payments altogether. The disadvantage is that it may take you longer to pay off your debt. For example, lowering your payments will naturally lengthen the amount of time it takes to get debt free.
Keep in mind that there are third-party debt management programs that will handle the negotiation process for you, but they often charge fees. In most cases, handling negotiations yourself is the best and cheapest move.
Around 59%-76% of people who enroll in a debt management plan successfully complete it, according to data from nonprofit credit counseling agencies.
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.
Other Ways to Deal With Credit Card Debt
You don’t always need to go through a stressful negotiation process with your credit card company in order to pay down your credit card debt. There are a few strategies you can consider before negotiation.
Make a budget to pay it off.
Sometimes, you may be able to get out of credit card debt just by changing your financial habits. Make a strict budget, cut out any unnecessary spending, and put as much money toward your credit card debt as possible each month.
If you have multiple debts, you can pay them off by targeting either the highest interest rates first (avalanche approach) or the smallest balances first (snowball approach). We recommend the avalanche approach because it minimizes the amount of interest you owe. You can use a credit card calculator to help you plan your payments.
Do a balance transfer.
You can move a debt with a high APR to a credit card with a lower APR. Many balance transfer cards offer introductory APRs of 0% for 12 to 24 months, which can save you a ton of money on interest. Just keep in mind that in order to qualify for most worthwhile balance transfer cards, you’ll need to have at least good credit. You may also need to pay a balance transfer fee of 3% to 5% of the amount transferred.
Get a loan to refinance or consolidate your debt.
You can get a personal loan or a home equity loan with a low interest rate in order to refinance an existing high-interest debt or consolidate multiple debts. Then, you owe that money to the new loan provider, but with a lower interest rate. You may need to pay an origination fee that’s a percentage of the loan amount, but if you get a low enough interest rate, the savings can be well worth it.
You can learn more about various debt solutions on WalletHub.
How to Negotiate With Your Credit Card Company About Other Things
You don’t need a lot of debt, or even any at all, to negotiate with your credit card issuer. You can negotiate for other things like interest rate reductions or fee waivers. Aside from situations of financial hardship, credit card companies will often negotiate terms with you if you’re a loyal customer who has expressed interest in switching to another company’s card.
In fact, 77% of people who have asked a credit card company to improve their account terms in order to keep them as a customer have been successful, according to a WalletHub survey. So the odds are very much in your favor!
Here are a few tips for negotiating your terms:
- Get pre-approved for other credit cards: You can get pre-approved for credit cards from various issuers with no impact to your credit score. Pre-approval means that you’re very likely to be approved if you apply, and you can typically see things like your estimated APR.If you call your credit card company and say you’re considering switching to a different card that you’re pre-approved for, they may be willing to improve your terms to keep you as a customer. If you got pre-approved for a lower interest rate than the APR on your current card, be sure to mention that. It might entice your issuer to match that rate so you don’t close your card.
- Make sure your score has improved: If your credit score is significantly better now than it was when you first got the card, it’s a lot easier to make the argument that you should receive better terms on your credit card account. If your score has stayed the same or gone down, that could indicate irresponsible credit behavior, which hurts your chances.You can check your credit score for free here on WalletHub.
- Be polite: A little bit of kindness can go a long way when talking to customer service representatives. You’ll have better odds of success if you’re polite and patient during the negotiation process.
In addition to negotiating the terms of your account, another thing you can ask for is a credit limit increase. If you’ve made at least six consecutive months of on-time payments and you’re keeping your credit utilization low, you’ll have a decent shot at getting more spending power. Keep in mind that asking for a credit limit increase might result in a hard inquiry on your credit report, which could drop your score by around 5 points temporarily.
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