How to Negotiate Your Credit Card Debt

Credit card debt can sneak up on you over time until you have an unaffordable mess on your hands. Or it can hit hard and fast in a single emergency. Excess debt is stressful, so it’s important to take control as soon as possible. You may be able to negotiate a much more affordable plan with your credit card company by following a few simple steps.

Can you negotiate with your credit card company? 

You can absolutely negotiate with your credit card company. Most card issuers have entire departments staffed with people to help customers manage their payments. These departments may be called “workout,” “loss mitigation,” “collections” or something similar. You can contact the right people by calling the toll-free number on the back of your credit card and explaining that you need help affording your bill. 

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Types of credit card debt agreements

Once you explain and document your situation with your credit card company, you may be offered one or more credit card debt solutions. 

Hardship plan

Some credit card companies have hardship plans for troubled customers. Some of these programs were set up during the worst days of the COVID pandemic and you may qualify if you are eligible. Hardship plan eligibility depends on your circumstances but usually hinges on issues over which you have no control. 

Examples of possible qualifying hardships include:

• A cut in pay or hours at work

• Job loss

• Serious illness

• Family emergency

• Death of primary breadwinner

• Natural disaster

• Divorce

Workout Agreement

A workout agreement can be helpful when you’re still able to make payments but penalty interest rates, late fees, and other charges are burying you. With a workout agreement, your credit card company may waive late fees, reduce your interest rate or drop your monthly payment. Expect your card issuer to freeze your credit line while you’re in a workout plan. 

Workout plans can help you reset and pay your balance down over time. However, if you violate the terms of your new agreement, the issuer may cancel it. In that case, your credit card’s regular terms including penalty interest and late fees may return. 

Understand the terms of any workout offered, make sure you can afford the payment and get any agreement in writing.

Forbearance

A forbearance is temporary relief from your monthly payment. If you expect your financial problems to be short-lived – for instance, you lost a job but expect to find another one soon – a forbearance may be all you need to get back on track. 

Even though your required payment might be zero during forbearance, your balance will probably grow as your account continues to rack up interest charges. It’s rare to have interest charges waived during forbearance. Be sure that you understand the terms of your forbearance and plan to make up the missed payments once the relief period ends.

Lump-sum settlement

Lump-sum debt settlement means negotiating a single amount as full and final payment for your entire balance. It’s a serious solution for long-term or permanent financial problems but may be preferable to bankruptcy. 

To pull off a lump-sum settlement, you’ll need to come up with money to offer your creditor(s). There are a few possible ways to make this happen:

• Tap your emergency savings

• Borrow against your 401(k)

• Take a hardship withdrawal from your retirement account

• Get help from friends or family

• Sell items you don’t need

• Save a sum over time by skipping debt payments and putting that money into a special savings account

The advantage of a lump-sum settlement is that your debt goes away as soon as it’s settled. The downside is damage to your credit score, and you may owe taxes on the amounts forgiven. 

How much can you get your debt reduced with a lump-sum settlement? It depends on the creditor, your situation and possibly your negotiating skills. Your credit card company (or any other creditor) is not required to negotiate or settle with you at all, and there is no guarantee that it will. 

DIY Negotiate Your Credit Card Debt in 3 Steps

Should you negotiate your credit card debt yourself? It can’t hurt to try because you can always consult a professional if your first attempt doesn’t work. Here are three simple steps to try before bringing in a pro.

Step 1: Compile information

You’ll want the answers to a few questions before you contact your credit card company:

• What is my monthly income – before and after taxes?

• What are my necessary monthly costs like housing, car payments, food and transportation?

• What’s left over for credit card debt payment?

• Is my situation temporary, long-term or permanent?

Your credit card issuer will want to know the cause of your problem. Explain it in a letter or on the form they provide, and submit documents to prove your hardship – for instance, medical bills, unemployment notices, etc. 

Here is a sample list of expense information that might be required by a workout department. Use this list to determine your expenses and budget your repayment:

• Rent/mortgage 

• Child care

• 2nd mortgage/HELOC 

• Cash donations

• Homeowners association

• Storage

• Gas & electric 

• Water/sewer/trash

• Cable

• Internet 

• Phone (landline)

• Property taxes

• Mobile phone 

• Homeowners/renters insurance

• Private insurance: life, disability, health

• Home maint/repair

• Copays/prescriptions 

• Auto insurance 

• Auto maintenance/repair

• Gasoline 

• Pets: vet exp/grooming

• Groceries 

• Gifts

• Meals out 

• Vacation

• Clothing 

• Travel

• Dry cleaning/laundry 

• Education expenses

• Hair/nails/cosmetics 

• Professional dues

• Entertainment/recreation

• Gym

Expect to also provide a list of your financial obligations – loan balances, interest rates, minimum payments, and due dates. 

Step 2: Run the numbers

Once you have a complete picture of your income, debts, and resources, you need to determine what you can afford to pay and what you want from your credit card company.

How do you know what you can afford to pay? Look at the information you listed in Step 1. Start with your take-home pay and subtract the necessities like food, shelter, transportation, loan payments, and child care. 

Next, tackle optional expenses and look for opportunities to cut back or cut out things like streaming packages, restaurant meals, and hobbies. Look at your new, leaner budget and see what’s left. You can use that amount for monthly credit card payments or save it up to settle your debt.

What if you can’t afford to pay much – or anything? That’s good to know because you won’t get yourself into deeper trouble trying to make an unaffordable solution work. 

Step 3: Contact your credit card company

Once you can explain your hardship and the help you need, contact your credit card company. This first call should tell you how generous the card issuer will be and how difficult or easy it will be to work out a solution. 

• Have a notebook in front of you with all of your information.

• Know what you want to pay – whether lump sum or monthly payment – and stick with that figure. Back up your reasoning with your numbers.

• Be calm and polite.

• If you are a long-time customer with a good track record, mention this fact.

• Make notes during the call and get the name and title of everyone you speak to.

• Get any agreement in writing.

• Find out how your arrangement will be reported to credit bureaus.

• Once you have a written and signed agreement, you can arrange for payment.

It’s crucial that you stick with your plan and its terms. Or you could end up worse off and deeper in debt. 

Can you negotiate with debt collectors and debt buyers? 

What happens if your credit card company sends your account to a collection agency or sells it to a debt buyer? Can you still negotiate a payment plan or settlement?

Possibly. First, if contacted by a bill collector or debt buyer, make sure that you owe the debt and that they are authorized to collect it. You can do this by requesting a debt validation letter proving that you owe the money. It should state how much you owe and the name of the original creditor. You can also ask for additional information like the date of your last payment. Don’t admit to the debt or offer any money until you are certain that it’s yours. 

Once you know that you owe the money, you can proceed to negotiate the payment or settlement you need. Start with a lower offer, such as 25 cents for every dollar you owe, and increase the offer incrementally until they accept it. The debt collector might not budge. But they may be willing to accept less than the full amount, especially if the alternative is that they get nothing.

Alternatively, you can propose a payment plan with a lower monthly amount that you can afford.  

How Freedom Debt Relief negotiates your credit card debt

If negotiating with your creditors is too daunting or time-consuming, or if your attempt at DIY settlement is unsuccessful, you might want to hire a professional debt negotiator. Freedom Debt Relief’s certified debt consultants are experienced in credit card debt negotiation and accustomed to dealing with most large credit card issuers. 

Your debt consultant helps you determine an affordable plan and works to reach a payment arrangement. Reputable debt settlement companies like Freedom Debt Relief will never ask for fees upfront, and you only owe debt settlement costs when you reach a satisfactory arrangement and settle an account.