How To Negotiate Credit Card Debt Settlement Yourself

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

If you’re stuck in credit card debt, it can feel hopeless. With increasing payments, ballooning debt balances and massive interest charges — credit card debt can get out of control quickly.

Here’s an overview on how to negotiate your credit card debt yourself, including the steps to take and how to prepare before calling your credit card companies.

What Does It Mean to Settle Your Credit Card Debt?

Credit card debt settlement is the process of settling — or paying off — your credit card debts for less than what you owe. Settling your credit card debt is reserved for when you’re behind on payments and you want to eliminate the debt balances before they grow too large.

How Often Will Creditors Allow Debt Settlement?

In general, creditors will only consider settling your credit card debt if you’re already in default or behind on your payments, according to the Consumer Financial Protection Bureau (CFPB). While some credit card companies offer hardship programs, you may want to eliminate your debt completely instead of continuing to accrue interest while paying a lower payment.

Credit card companies won’t simply let you pay less than you owe. You’ll need to work with each credit card company to agree to a payoff plan.

Some credit companies that offer relief or hardship programs include:

• American Express, Member FDIC
• Capital One
• Discover Bank, Member FDIC
• Wells Fargo
• Citi®

Usually this is a last resort before filing bankruptcy.

Good To Know

Some credit card debt settlement companies can handle the entire negotiation and settlement process for you, but it may come with high fees. Most of the time, these companies don’t guarantee a settlement.

When Should You Try to Settle Credit Card Debt?

If you are experiencing financial hardship and having a hard time keeping up with your credit card payments, consider settling your debts. Here’s when it makes sense:

• If you’re already behind on payments
• The minimum payments are getting too high to afford.

Settle Before Your Debt Gets Sold

If your credit card debt has been sold off to creditors, it may be a good idea to find a way to settle your debts before you are sued to collect the debts you owe. Settling your debts can stop the collections calls and even potentially remove the debts from your credit report if you settle with the credit card company directly.

Use Credit Card Debt Settlement As a Last Resort

You should really only consider it if you have no other options besides bankruptcy. Consider speaking with a financial advisor first. Because debt settlement is paying off your credit cards for less than you owe, it can hurt your credit score and have tax implications on the forgiven debt amounts.

Know the Risks and Benefits

Settling your credit card debts can help you get caught up on your payments, provide financial relief for your budget, and help you “reset” your financial life. But debt settlement isn’t without risks, so you’ll need to weigh the pros and cons of debt settlement before choosing to settle credit card debts.

Benefits:

• Settle for less than full balance
• Stop collection calls
• Get a clean slate

Risks:

• Credit score will drop
• May owe taxes on a forgiven amount
• No guarantee the creditor will agree

Tips for a Successful Negotiation

Here are a few tips for successfully negotiating a settlement with your credit card company:

• Start small: Start by offering 30% to 50% of your balance. Your creditor may push back on that number, but if you start small, you still have room to negotiate a number you can afford.
• Be persistent: You may need to call back multiple times to get an agreement in place. Don’t get upset and stop trying, but continue calling back until you can reach an agreement.
• Protect your credit: Ask if your creditor will remove negative marks from your credit as part of the debt settlement process. While getting on a payment plan can affect your credit, ask them to remove any missed payments or default status to help protect your score.
• Get it in writing: Don’t send money until you have a written agreement from your credit card company so that you can hold them accountable to the agreement.

How To Prepare for Your Debt Settlement Call

When you decide to settle credit card debt yourself, you’ll need to contact each creditor directly. Do the following before you contact your creditors:

1. Gather the information necessary to support your request. These might include:
   • Your personal and account information
   • A written statement explaining your hardship
   • An overview of your current financial situation, including assets and debts
   • Your proposed payment plan option
   • Documents such as a tax return, bank statement, pay stubs, etc.
2. Be prepared to explain why you haven’t been able to pay off your debts.
3. State how much you’ll be able to afford to pay going forward.
4. Be as detailed as possible to prove your financial hardship
5. Let them know you’re willing to pay but can’t afford the current minimum payment and are prepared to settle the debt you owe for less.
6. This could be a lump-sum payment, or a payment plan agreed upon with your creditor.

You might consider bringing up the fact that you’re thinking about bankruptcy. Although a settlement might pay your creditors less than what they’re owed, bankruptcy usually pays them nothing — so they could be more willing to negotiate.

What To Say When You Contact Creditors

When you do get on the phone with your credit card company, make sure to stay calm and respectful during the conversation.

• Ask to speak with someone who can help you set up a payment plan — this may be a supervisor or a special department that handles debt settlement and negotiation.
• Explain in detail your financial situation and why you can’t afford to pay off your current balance.
• Discuss your proposal of what you can afford to pay right now.
• If you’re asking to settle the entire balance, be prepared to verbally agree to an amount that you can pay off to settle the debt right away.
• If you are proposing a payment plan, make sure to lay out the exact terms of the plan, including how much you can pay each month and how many total payments you can make.

What Happens After Your Debt Settlement Plan Is Approved?

Once your creditor agrees to a proposed plan, ask for a copy of the plan in writing. This makes it official and gives you legal ground to require them to uphold the agreement. 

If your creditor pushes back and won’t accept your offer, continue the conversation to come to an agreeable payment plan. But make sure you don’t agree to anything you can’t afford — or you’ll continue to be stuck in debt and potentially rack up more interest and fees.

What To Do After Reaching a Settlement

Once a settlement is reached and you have the agreement in writing, you’ll want to set up your payment or payoff plan.

Before You Make Payments

Make sure you have a way to keep track of your payments and communication from your creditor, such as a dedicated folder on your computer for saving emails and payment confirmation receipts, or an app to keep track of your payments.

Pay On Time

Stay on top of your agreed-upon payments by adding reminders to your calendar. Check in with your credit card company regularly to ensure they are recording it on their end, according to your agreement.

When the Debt Is Resolved

Check your credit report to ensure your credit card company reports the debt as settled. If you had any agreements about removing late payments or other reports, downloading a copy of your credit report can help you hold your credit card company accountable to this agreement.

You can receive a free credit report every year from Annualcreditreport.com.

Alternatives to Negotiating Yourself

Settlement isn’t the only option for getting rid of debts. Take a look at these four alternatives to debt settlement:

Consolidate Debt

You take out a debt consolidation loan to pay off your debts and have only one monthly payment. If you think you’ll be tempted to max out your newly freed up credit, though, this option isn’t for you.

Declare Bankruptcy

You can get legally released from specific debts and stop creditors from taking action against you as a debtor. Although this might sound good, this option will have the worst impact on your credit score.

Form a Debt Management Plan

Consider using a credit counseling organization to help you negotiate with your creditors. You might be able to lower or eliminate finance charges while you repay your debts.

Work With a Debt Settlement Company

Debt settlement companies will negotiate with your creditors on your behalf — for a fee. Proceed with caution on this one — make sure you understand the terms and conditions before using a debt settlement company, you may risk getting hit with high fees and hurting your credit score.

Share This Article: