Personal Loans

How to negotiate credit card debt

By
Mary Beth Eastman,
edited by
Kelly Larsen
Updated June 16, 2023, 6:10 p.m. ET
A man calls his credit card company.
Shutterstock

If you’re feeling overwhelmed by debt, know that it’s not just you. American🍌s added a record-breaking $61 billion in cre𓆉dit card debt in the last three months of 2022 alone, according to a report released by the . 

Younger borrowers are especially affected, with people in their 20s and 30s increasingly struggling to make their payments. Data from the also shows that credit card b🅺alances are up sharply, with the average balance at $3,283. And with the average credit card interest rate currently at 20.92%, carrying a balance can be very expensive.

Even if managing your debt feels hopeless, you have options, like working with your credit card company. Learning how to negotiate credit card debt can help you stay afloat during difficult times. ♉It migh⛦t even reduce what you owe.

Is it possible to negotiate credit card debt?

Yes, it’s possible to negotiate your credit card debt. In fact, if you’re struggling, it’s a good idea to reach out to your credit card company as soon as possible to let them know. The sooner you contact them, the sooner you can solve the🔯 problem together.

Negotiating your credit card debt can be a win-win. You get the help you need to escape from your burdensome balances, and the cr👍edit card company still gets to recoup at least a portion of their money. 

“At some point, the creditors will be focused on getting some money from you rather than it just getting written off as bad debt,” said Jay Zigmont, a certified financ🍰ial planner who has a doctorate in adult learning. “You may be able to offer as low as 25% to 30% of the total debt i✤n order to settle it in full.” 

🐠For example, if you owe $10,000, you might be able to settle your debt for $2,500. The key is that you need to have the full 🐷$2,500 available before you begin negotiating, Zigmont said.

What is credit card debt settlement?

Credit card debt settlement is an offer to pay off your credit card debt under different terms than you originall🌟y agreed to. You might pay less than the total amount when you settle your credit card debt.

When you settle your debt with the credit card company, you both must agr♚ee to these new terms. If you fulfill the terms, the credit card company will consider the debt paid off.

What are the types of credit card debt settlement?

There are different types of credit card debt settlement. The one that’s best for you will depend on your circumstances ꦑas well as the ♔credit card company’s policies (and flexibility).

Lump-sum settlement

A lump-sum settlement lets you pay the whole balance at once⭕, usually for an amount that is less than the total amount you owe. The credit card company agrees that this new amountও will settle the debt.

Hardship agreement

A hardship ag🐼reement or hardship program is designed to help you through specific situations that put you in financial hardship, such as being laid off. You can get temporary relief through these programs.

Workout agreement

Under a workout agreement, the credit card company may agree to make changes to help you pay down your de💙bt more easily, including lowering the payments or interest rates.

Determine how much credit card debt you have

Your first step to negotiating is knowing♓ where you stand. Check your credit card statements or online account and look for the following information:

  • How much you owe on each card
  • The interest rate on each card
  • The minimum payment due
  • The total balance

Yoꦍu’ll also need to know your total monthly income and other debt obligations, so you know how much you can afford to pay toward your credit card debt each month.

Contact your credit card company

Once you know how much debt 🐟you have, reach out to your credit card issuer. Let them know your situation and tell them you’d like to work with them to find a solution. If your struggles are due to job loss, medical bills, or other unexpected expenses, let them know that, too. It could help them decide whether to offer a hardship agreement.

Ask about payment plans

Ask the company whether it’ll offer a payment plan, a hardship program, or a payment assistance program. This lets you repay your debt in regular installments, so you’re still⛦ making payments, but they’re more manageable.

Get your agreement in writing

Whatever you and the credit card company decide, make sure you get it in writing. Note the day and time you called, whom you spoke with, and w𝓡hat was agreed. Your credit card company may send you a form to fill out and sign; keep a copy of that as well. 

When the payment arra💞ngement is in writing, you and the company can both refer to it if you have questions or concerns later.

Consider debt settlement or credit counseling

If you need a little backup for your negotiations, there ar🐠e professionals who can help.&🅘nbsp;

A debt settlement company can negotiate on your behalf, contacting creditors for you to offer a lump sum that settles your debt. Look for reputa🌞ble companies with excellent ratings to avoid scams, and never pay upfront for these services.

Credit counseling is available from nonprofit organizations. This is a good option for helping you develop a workable budget, so you can get out of debt now and avoid it inও the future, too. They can also help you design a debt management plan that might be able to reduce your payments, lower your interest rates, and eliminate fees.

Other options for credit card debt

If you prefer to tackle your credit card debt on your own, without negotiating, you can. Two main alternatives for paying down debt are using a balance transfer card or a debt consolidation loan. 

Balance transfer credit card

It may seem odd to use a credit card to pay off 𒊎your credit card debt, but this technique takes advantage of the special features that balance transfer cards offer, such as lower rates. With this method, you transfer all your credit card balances onto one card andꦍ make payments on that card. 

Pros 

  • Very low rates: Typically, you’ll receive a lower interest rate — sometimes even a 0% introductory rate — on a balance transfer card, which lets you save money on interest. These introductory rates often last for up to 21 months, which gives you time to pay off your debt without racking up more interest.
  • Streamlines your debt: You can roll all of your debts onto one card and have one monthly payment, rather than several.

Cons

  • Additional fees: While you may save money on interest, these cards often charge a fee for transferring your balances from other accounts. These fees are usually a percentage of the balance or a flat dollar amount, whichever is greater. A balance transfer card may not be worth it if the fee is high.
  • Introductory periods end: For cards with introductory rates, you have to be prepared for the interest rate to increase when the introductory period ends. If you haven’t paid the balance by then, you could accumulate more debt in finance charges.

Debt consolidation loan

Another option is a debt consolidation loan, which combines your existing credit card debt into one new personal loan. You can also consolidate your debt using a home e♑quity line of credit or a second mortgage.

Pros

  • Lower interest rates: The rates on personal loans tend to be much lower than the average credit card rate. While the average credit card rate was over 20% in February 2023, the average personal loan rate was just 11.48%, according to the . Plus, most personal loans have fixed rates, meaning they don’t change. 
  • Simplifies your finances: Another perk of debt consolidation loans is that you streamline your debt payoff with just one regular monthly payment, instead of tracking multiple balances, payments, and due dates. This can also make it easier to budget going forward.

Cons 

  • Loan fees: If you choose a lender that charges origination or other loan fees, this could add to your debt. 
  • May not qualify: If you have a lower credit score (below 670), you may struggle to qualify for a loan or a good interest rate.

With a little work upfront, and some third-party help if you need it, you can get your finances back on track an💎d pay off your expensive credit cardꦇ debt.