How to Negotiate A Credit Card Settlement and Cut Your Debt for Up to 60%

Share Have you explored the possibility of a credit card settlement when you feel like you are struggling under a crushing mountain of debt?

More and more Americans find themselves in this position each year – in such a tight economy like the country currently faces, sometimes your credit cards are the only way you can put gas in your car and groceries on your table.

But unless you are able to pay off balances in full each month, your debt can suddenly skyrocket. Forget about clearing your debt – now you’re just scrambling to meet your minimum payments.

If this depressing situation sounds all too familiar, you should investigate a credit card settlement. These settlement options can help you reduce or sometimes even eliminate an outstanding credit balance, and help you restore financial security to your life.

Credit card settlements involve direct negotiation with your credit card companies for forgiveness of part or all of the money you owe them.

Frequently, companies are open to achieving some sort of settlement, if for no other reason that getting some portion of your debt repaid is more money for them, than a debt that is completely abandoned.

It additionally saves them the labor and expenses of taking you to court in order to force you to pay your debt in full.

Typically, credit card settlements become an option once other avenues of debt collection have failed. Credit card companies sell delinquent accounts to collection agencies for pennies on the dollar, and write off the rest of the debt.

The collection agencies, then, are free to pocket whatever they can collect from you.  As a result, you might have the opportunity pay a fraction of what you owe, as long as you are able to pay the amount of the negotiated settlement in full to the collection agency.

See more on how you can take advantage of debt relief in managing your credit card debt.

You have the option to negotiate directly with collection agencies yourself, or to use the services of a professional debt relief organization to achieve the terms of your settlement.

Another option can be to replace any cards you have with low interest credit cards.

While you certainly can do the legwork and endure some fairly confrontational calls on your own, you will definitely need to do your homework and be aware of your legal obligations prior to attempting a credit card settlement yourself.

If you decide to go it alone, here are some things to investigate:  You will need to know how your credit company operates – their internal policies on chasing debt and their stance on when in the process they will initiate legal action. 

You should also research how and in what sort of circumstances they are willing to forgive debt completely.  If you do not have the time or the inclination to attempt this research, focus on finding a good debt settlement organization that you can work with.

A debt relief organization will make use of their connections in the industry and negotiate in bulk, not just for you but for many other people dealing with the same creditor. 

As a result, they will typically be able to negotiate a forgiveness of between 40 to 60 percent of your debt.  Good companies will just take their fee from whatever they can save you, so you will not be charged exorbitant amounts on top of your credit card settlement. 

Ensure you are not working with a fly-by-night debt settlement organization – there are shady companies out there, mainly interested in taking your money instead of working to settle your debts.

You should only work with a company that can offer you references and direct examples of success negotiating on behalf of their clients.

Keep in mind that debt settlement, whether you negotiate for yourself or through a legitimate relief company, will have a negative impact on your credit score – after all, as far as the credit bureaus are concerned, you have not made payment in full on your entire debt.

However, credit card settlements are significantly easier, both fiscally and emotionally, than dealing with protracted court cases, and you may decide your peace of mind is worth the trade-off.

You will also need to ensure you can pay the credit card settlement amount in full, as collection agencies will not let you pay this settlement in installments.  Consider how this may impact your current finances, and plan accordingly. 

Find out more on Credit Card Relief.

Be aware, however, that you shouldn’t blindly walk away from a settlement offer – if you abandon the negotiation process, your creditors are legally free to pursue you in court for the full amount of your debt, plus their court fees.

When you have created a financial plan you can live with, ensure your settlement offer is put in writing.  Only pay your settlement once you have those terms in writing, and with your check you should include a letter stating that this is the last and final settlement of your debt.

See more in depth how credit card and debt settlement relates.

Keep copies of this correspondence in case there are any further inquiries about your settlement, and ask that your creditor write you a letter of acknowledgement in return.  Be sure to follow up on the status of your credit report, to ensure your settlement has been reported in a timely manner, and no errors exist.

See more related articles about this topic:

Ways in Settling Credit Card Debt

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