How to negotiate credit card debt

By Brian O'Connell
Published  May 20, 2022 2:03pm CDT
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If you’re drowning in credit card debt, you might be able to settle with your creditors for less than you owe. Learn how to negotiate credit card debt. (iStock)

There’s no doubt about it — Americans love their credit cards. More specifically, they love using those credit cards.

The average consumer carried just over $5,200 in credit card debt in 2021, with credit card debt in the U.S. totaling $784.5 billion, according to Experian data.

With high credit card debt often creating a significant household financial burden, what can credit card owners do to alleviate that debt? One option is to negotiate your credit card debt down to less than you currently owe.

Here are some different options for negotiating credit card debt, as well as other solutions for managing your debt.  

Consolidating high-interest debt with a personal loan is one way to manage credit card debt. Credible makes it easy to see your prequalified personal loan rates from various lenders.

3 options for negotiating debt settlements and agreements

Credit card companies can and do negotiate card debt with customers. To start the negotiation process, contact your credit card issuer directly to discuss your options.

Keep in mind that negotiating your credit card debt will likely have a negative effect on your credit. But any credit hit you take from credit card negotiation will probably be less damaging or lasting than other options, like default or bankruptcy.

You have three main options for negotiating credit card debt. The one that’s best for you will depend on your unique financial situation.

Hardship agreement 

When the going gets tough and you lose a job, grow ill, or otherwise lose the ability to pay your credit card debt, it’s worth asking your credit card company if it offers a hardship plan.

With a credit card hardship agreement, your credit card issuer may suspend your payments or reduce your interest for a specific period of time. Once the crisis passes, you can resume paying your credit card debt under the original terms spelled out in your credit card agreement. 

  • Best for — Those who have fallen on hard times and need to suspend credit card payments temporarily
  • Drawbacks — Can be hard to find and even more difficult to negotiate, as not every creditor offers a hardship option

Lump-sum settlement 

Another option if you’ve fallen behind on your credit card payments is to negotiate a lump-sum settlement with your credit card company.

For example, if you owe a past-due balance of $5,000 on your credit card and let your card issuer know you can pay $4,000 to settle the debt at once, the credit card company may approve the settlement — as long as you follow through and make the agreed-upon payment.

Note that your credit score may take a hit in a lump-sum payment deal. Credit-scoring agencies may record the payment as a partial one, and that you won’t be paying the full amount owed on the credit card debt. Settled accounts can stay on your credit reports for up to seven years, but it’s possible for your score to recover.

  • Best for — Those who have cash on hand to settle large sums of debt
  • Drawbacks — If you’re in a cash flow rut, it’s not easy coming up with thousands of dollars in cash to pay a lump-sum debt

5 WAYS TO IMPROVE YOUR CREDIT SCORE

Workout agreement

You may be able to talk to your credit card company about a workout agreement, where your lender will renegotiate your terms. Credit card providers may agree to reduce your interest rate or minimum payment amount as long as you make good on the new payment arrangements.

By "working out" a deal, credit card companies are getting some of their money back. 

  • Best for — Those who need time to get back on their feet financially
  • Drawbacks — Your lender may not want to negotiate a workout agreement

How to negotiate credit card debt 

If you’re ready to negotiate your credit card debt, follow these steps: 

1. Know where you stand 

Don’t go into a credit card negotiation without knowing where you stand. Make sure you know your total amount of credit card debt, your interest rate, and minimum monthly payment amount. Read your card contract’s fine print before reaching out to your credit card company. This will let your card issuer know you’re serious about a deal and can improve your chances of a successful negotiation.  

2. Check your options 

Review the various credit card settlement options — a hardship plan, lump-sum settlement, or a workout agreement — and decide which one best works for you. If you’re unsure, consider talking to a credit counselor who can help steer you in the right direction. 

3. Contact your credit card company 

Once you’ve got your credit card negotiation strategy in place, contact your credit card issuer and ask for its debt settlement or loss mitigation department. In general, a customer service representative isn’t the best person to discuss a settlement deal with — you’ll need to talk to a manager or debt settlement specialist. 

4. Take notes and get everything in writing 

Take thorough notes and use that information as leverage in making your case.

If you do come to an agreement, have your credit card company officially confirm the terms of your negotiation in writing, either with an email, fax, or by mailing you a letter. Once you receive the documentation in writing, read it thoroughly. If anything seems amiss, contact your credit card company to address the issue.

If you’ve decided that a personal loan to consolidate credit card debt is right for you, visit Credible to see your prequalified personal loan rates in minutes. 

Why creditors may be willing to negotiate

Credit card companies may be willing to negotiate your credit card debt for a few reasons:

  • Something is better than nothing. Credit card companies are open to negotiating debt because getting some of their money back is a better option than getting none of it back.
  • They don’t want to lose you as a customer. Good customers who fall on hard financial times can rebound to start making regular payments again. Card issuers know this and are often willing to work with customers with temporary cash flow issues.
  • No collateral option. Since credit cards are an unsecured form of credit that don’t require you to provide collateral, a credit card company may be willing to negotiate with you since it isn’t able to take any collateral if you don’t make your credit card payments.

HOW OFTEN DOES YOUR CREDIT SCORE CHANGE?

Other credit card debt solutions

If you aren’t able to negotiate your credit card debt, or your card issuer doesn’t offer any settlement options, you have other ways to manage high-interest credit card debt. 

Balance transfer credit card 

If you have high-interest credit card debt but decent credit, you might be able to transfer a hefty credit card balance to a new credit card with an introductory 0% APR. By transferring your credit card debt to a new card, you can pay off your existing debt without accruing any interest.

But keep in mind that if you don’t pay off the balance on the new card in full by the time the promotional period ends, you’ll start accruing interest at the card’s regular rate. It’s important to consider some pros and cons of a balance transfer credit card before signing on:

  • Pro — With no interest to pay during the introductory rate period, all your card payments go toward paying the balance off, giving you an opportunity to pay down debt more quickly.
  • Con — Balance transfer card deals can come with onerous balance transfer service fees — often 3% to 5% of the transferred amount.

Personal loan for debt consolidation 

Another option for paying down credit card debt is to take out a personal loan. You can pay off your credit card debt with the loan funds, and then you’ll begin making payments on the debt consolidation loan. These loans usually come with lower interest rates than credit cards, which can help you save money over time. 

  • Pro — You’ll have fixed monthly payments and a set end date for when the loan will be paid off.
  • Con — Once you use a personal loan to cover your credit card debt, you still have to pay off your personal loan debt. Make sure the monthly payments will fit within your budget so that you don’t miss a payment, which can hurt your credit.

Credible lets you compare personal loan rates from multiple lenders, all in one place. And it won’t affect your credit score.