How to Negotiate Credit Card Debt

Many times people get in over their head with credit card debt. It may be due to the loss of a job, unforeseen expenses such as medical bills or a death in the family, or for a variety of other reason. But whatever the reasons, you’re left with a mountain of bills you can’t pay. If the situation is really dire, and you’ve exhausted all your options to eliminate credit card debt, you may be able to reduce the amount you owe by negotiating credit card debt.

Credit card debt negotiation aims to do one of three things – reduce your APR, reduce your monthly payments, or reduce the total amount of debt you owe. The credit card company’s goal is to get as much of the money that they’re owed back from you as the possibly can. This means that the further your account goes into delinquency, the better your chances are that you can negotiate away a portion of your debt. This still gives your credit record a substantial hit, resulting in high interest rates for loans in the future, but it’s a much smaller hit than ignoring your debts or entering into bankruptcy will.

The most effective way for you to negotiate your credit card debt is to call your bank or credit card company directly and explain the situation to them. Depending on your situation and how far in debt you are, you may want to employ different strategies.

Lowering Your APR

If your APR is too high and you’re paying most of your money in interest each month instead of principle, the easiest thing to negotiate with your card company will be a reduction in your interest rates. This is where your conversation should start at. Even if you’re not behind in your payments yet, you still may be able to negotiate down your interest rate because of the cut-throat competition from other lenders. In fact, being a loyal, promptly paying customer will work to your favor on with this approach.

When you call your bank tell them that you’ve either gotten a balance transfer offer to consolidate your cards or simply a better overall offer from another credit card company. Most times your credit card company will be willing to negotiate down your interest rate to keep you on as a loyal customer. This tactic may not work if you’re behind on payments however. If you’re late on payments your company most likely jacked up your APR to sky high levels to punish you for it, so they will be much more reluctant to take it down until you’ve proved you can pay on time.

Negotiating Your Monthly Payment

Your credit card company will be much less willing to negotiate you monthly payment if you don’t yet have any late payments. If you’re late, but not yet in collection, this is your surest bet if you make the case that you will be able to stay current with lower monthly payments.

Especially if you’re not late yet, make sure you have your story laid out before you call your card company. Come up with all the reasons why you’re not able to make your current payments and make it as touching as possible. If you make a good enough case you representative may be more sympathetic to lowering your payments.

If your account has passed the delinquency phase and has been passed to a collections agency, you may be able to negotiate away a large portion of the debt that you owe. You best bet to be able to do this is have a large lump-sum payment available to pay the creditor.

Once your account has passed into collections phase, the goal of both the collections company and the credit card company is to receive some kind of money from you. The further your account is past due, the more likely it is the company will negotiate with you. You’ve already proven that you’re a risk for non-payment so it is in their best interests to accept the sure thing, a large lump sum payment, instead of betting on your very uncertain ability to repay the debt in the future.

However, this isn’t to say that you should let your credit cards go into collections phase to give you leverage in negotiations with your lender. The fact you negotiated down your debt WILL go on your credit history and may result in you having a harder time to obtain sources of credit for a reasonable price in the future. That being said, negotiating down your debt won't give you qute as much of a bad credit score as outright bankruptc

If you’re in over your head there are many different things you can do to negotiate down your credit card debt. Make sure you do your research before you call your card company so you know exactly what you want and the effects of it. When you do call, make sure you tell them exactly what you want, after all, the squeaky wheel gets the grease.