3 Ways To Negotiate a Credit Card Debt Settlement Yourself.
Posted: April 10th, 2012 | Author: Joe | Filed under: Credit, Debt, Tips | Tags: Credit Debt, Debt Negotiation, debt settlement, debt solutions | 7 Comments »If you’re one of the millions of credit card holders who has found themselves buried in credit card debt with a balance you can’t hope to pay down, then you may be wondering if you can Negotiate Your Credit Card settlement yourself. Well, it is possible to do, but it’s not easy.
3 Ways To Negotiate a Credit Card Debt Settlement Yourself.
The first thing you need to consider is what kind of arrangement you are going to seek. Let’s be honest, you’d like your credit card company to forgive all your debt and pretend it never happened, but short of bankruptcy, that isn’t likely to happen.
Once you’ve accepted the reality that you will need to pay something, you need to determine what that something will be. Here are 3 possible debt payment solutions to offer to your credit card company when you make the call.
I. Lump-sum settlement.
This is by far the easiest to understand and to sell to your credit card company, but it’s often the hardest to carry out, because you need a large sum of money available.
Since most credit card issuers aren’t going to negotiate until you are behind, one strategy is to stop making payments to the credit card company and put that money (and as much extra as you can afford) into a savings account for a few months.
This is what many debt settlement companies do for you, or at least it’s what they say they will do for you. In many cases, they hold the money and let the credit card company come after you for the full debt owed anyway. It’s a big reason why debt settlement is not a good idea in many cases.
If you have access to a chunk of money, they you can make an offer to your credit card issuer for a 1 time payment that is less than the full amount you owe.
WARNING: This technique will likely hurt your credit score, but then again so will having a high debt balance and not paying it off…
II. Workout arrangement.
This is a much easier option to carry out than the lump sum. The Workout arrangement is when the bank agrees to freeze your interest payments and late fees while you payback your balance. This is also the most ethical solution in my opinion, because you’re telling the credit card company that you will meet your obligations and pay back what you owe, as long as they agree to stop pushing you back under while you do it.
WARNING: You will most likely no longer be able to use your credit card, since the bank will probably lower your limit. This is a good thing in the long term though, since it will keep you from racking up even more debt. However, the lower credit limit will increase your debt-to-income ratio, and lower your credit score.
III. A Forbearance Program.
This one is probably the easiest solution to sell to the credit card company, but not the best for your bottom line. A forbearance program is an agreement by the bank to pause your payments and interest fees while you get your finances back on track. This is like taking a timeout to gather your resources for the next play.
The next play though is usually getting back on a payment plan in which you agree to pay the full amount owed and any interest and late fees accrued – forbearance is not forgiveness.
Final thoughts.
Whichever solution you choose, keep in mind that these are tough times for everyone – credit card companies included. They can’t get blood from a stone and they know that. Credit card holders still have a lot of leverage and everything is negotiable. Job loss and negative home equity have put the squeeze on banks trying to collect full payment.
You can use one of the debt solutions from above as a starting point, then see what else you get bargain down in the process. For example, you might get the bank to forgive all late fees and interest fees and give you a forbearance if you agree to pay the full principal. It all depends on your situation, and is up to the individual creditor.
Regardless of which solution to choose, be sure to get your credit card issuer’s agreement in writing before you send them any money.
Also, be sure to read How to Negotiate Your Credit Card Debt for more detail on the actual process behind making the call.
…and for your own sake, stop living beyond your means or you’ll find yourself back in the same place further down the road. It’s the number 1 reason why Debt Settlement And Loan Consolidation Don’t Work.
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Interesting, I have always paid my balance off in full every month. I think it’s pretty irresponsible not to, although many people do it. That being said, I didn’t know much about this topic so thanks for the tips.
Personally, if I was in this situation I wouldn’t really care about what’s most ethical. The credit card companies took a risk by loaning money to me and if I default, that’s my problem. I’d try and negotiate a way to pay back the least amount. But that’s just me and I’m one cheap SOB
I’d be careful about the first strategy of stopping making payments. That will look very bad on your credit history. I’d explore all other options first. Also if you are unable to negotiate some kind of settlement on your own, there are plenty of companies that can help you with this. They may have additional leverage to negotiate an even better settlement.
You make a good point MM, but this is not something the casual card carrier would or should consider. It’s really more of a last ditch effort before bankruptcy, so your credit score is likely in rough shape or will be anyway. Also, it’s a common tactic that many debt settlement companies do, and the unscrupulous ones say they do but don’t – taking your money instead.
I’m not trying to hate on anyone, but after reading this, I have to say that I am SO GLAD to not be in credit card debt. What a pain!
[...] ice on my knees in the background)Top Posts of the WeekJoe Morgan @ Simple Debt-Free Finance writes 3 Ways To Negotiate a Credit Card Debt Settlement Yourself. – If you’re one of the millions of credit card holders who has found themselves buried in [...]
[...] Morgan @ Simple Debt-Free Finance writes 3 Ways To Negotiate a Credit Card Debt Settlement Yourself. - If you’re one of the millions of credit card holders who has found themselves buried in credit [...]