How to Negotiate Your Credit Card Debt

Credit card debt is a common challenge, which means there are a lot of tools out there for overcoming it. You have options for credit card debt relief that can make it easier to handle and get you back on track.

One option may be to negotiate your credit card debt with your card issuers. Read on to learn more about the process and who should negotiate their debt.

Can You Negotiate with Your Credit Card Company? 

Yes, you can absolutely negotiate with your credit card company. 

Results vary, but you could potentially negotiate anything from a lower interest rate and waived late fees to partial debt forgiveness. Any of these credit card debt solutions could make your debt easier to afford and hopefully get you debt-free much faster.

Most card issuers have entire departments staffed with people to help customers manage their payments. They don’t tend to advertise options that are available to people who are struggling with 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

The outcome of your negotiation will depend on a lot of variables, including:

• Your current debts

• Whether you're current or behind on payments

• How much you can afford to repay

• The nature of your hardship

Once you explain and document your situation with your credit card company, you may be offered one or more of these common types of credit card debt agreements.

Hardship plan

A credit card hardship plan is a temporary relief program some credit card companies offer to borrowers who are experiencing short-term financial difficulties. Depending on the issuer, a credit card hardship plan may allow you to:

• Pause payments or make lower payments for a specified period

• Temporarily reduce your annual percentage rate (APR)

• Waive late fees

• Pay off your balance through an installment plan

Hardship plan eligibility depends on your circumstances and often 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

A hardship plan offers temporary relief when you can’t afford your payments, but it typically doesn’t lower the amount of your debt.

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 could help you reset and pay your balance down over time. However, if you violate the terms of your new agreement, the issuer may cancel the plan. In that case, your credit card’s regular terms including penalty interest and late fees may kick back in. 

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

Forbearance

A credit card forbearance is a temporary payment pause. 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 a 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 reduced payment as full and final payment on the debt. The creditor accepts the lesser amount and forgives the rest of your debt. Debt settlement is a serious solution for long-term or permanent financial problems. 

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 over time by skipping debt payments and putting that money into a special savings account instead. If you opt for this strategy, your credit will suffer.

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. 

When you negotiate a debt settlement, how much debt can you get forgiven? 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. 

Negotiate Your Credit Card Debt Yourself 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's a sample list of expense details that might be required by a workout department. Use this list to determine your expenses and budget your repayment:

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 might tell you how generous the card issuer will be and how difficult or easy it'll 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're 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.

Don’t be afraid to politely end the conversation without an agreement and try again after a few weeks. Creditors want their money, so sometimes they play hardball. Negotiation could take a few rounds.

Once you have an agreement, 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. Many debt buyers pay pennies on the dollar, so they could be willing to accept less than the full amount you owe since they'll still make a profit. Before you even start negotiations, however, you need to verify the debt.

Always verify you owe a debt before starting negotiations

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. 

The debt validation letter 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're certain that it’s yours. 

Once you know that you owe the money, you can proceed to negotiate the payment or settlement you need. 

How to negotiate your credit card debt with a debt collector

Start with a lower offer, such as 20 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. Use the same tips above to run the numbers on what you can pay each month, and use that data to negotiate with the debt collector for a plan that you'll be able to maintain. 

Tips to Negotiate Your Credit Card Debt Successfully

Negotiating with your credit card issuers will probably take some time and effort—and perseverance. Here are a few tips for a successful negotiation:

• Be prepared. Have all the documents you may need at hand during the negotiation so you are ready for whatever they may ask. This might include your latest credit card statements, pay stubs, or supporting documents to prove financial hardship.

• Know what you can afford. Whether you're looking to lower your monthly payment or settle your debt entirely, go into negotiations with a firm number in mind so you don't wind up with payments you still can't afford.

• Keep a record of everything. Keep copies of documents you send and receive, make records of phone calls, and get any new terms in writing so everyone is on the same page.

• Stay calm and polite. The person on the other end of the line is another human just doing their job. Yelling, cursing, or otherwise losing your cool isn't going to help your case. In fact, it'll likely hurt it. So stay polite and respectful in all of your communications.

• Have patience. Negotiation can take time, especially more complex negotiations like debt settlement. Nothing is going to be fixed overnight, so don't get frustrated if things aren't moving as fast as you want.

How Freedom Debt Relief Negotiates Your Credit Card Debt

If negotiating with your creditors is unpleasant, overwhelming, or too 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. Also, we already have relationships with most creditors.

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 after you reach a satisfactory arrangement and settle an account.