Getting a Discounted Payoff on Credit Cards

If you can't pay your balance, work with your creditor.

If you can't pay your balance, work with your creditor.

A discounted payoff on credit cards is also called a debt settlement. When you're unable to pay your monthly credit card payment, you can request a lump sum debt settlement. You negotiate a lump sum payment that is less than the total balance on the card. While it may seem attractive, it significantly damages your credit and may not protect you from legal action on the part of your creditor. If you're unable to pay your credit card debt, a better option is to either work with your creditor on a payoff plan or consult a bankruptcy attorney.

Contact your creditor. If your debt has been handed to a debt collector, which typically happens after two or three missed payments, you should still be able to negotiate with your original creditor. At this point in the debt delinquency process, your original creditor may offer more flexibility than a debt collector.

Offer a settlement amount. While most creditors want at least half the balance owed, you should offer less. When entering a negotiation, start with your best offer and work up from that number.

Get the settlement amount in writing from your creditor. You need a written statement that specifies the creditor or collector for this debt won't pursue the unpaid balance. You also want the statement to clearly note that the debt was settled in full. If possible, see if the creditor will note to credit reporting agencies that the account was paid as agreed, which better protects your credit rating.


  • Your credit score reports negative information, such as a debt settlement, for seven years. Debt consolidation means getting one loan to cover all of your credit card balances; it is not the same as debt settlement. Any discounted amount is a tax liability. Money that you owed, but did not have to repay is considered taxable income. Consult your tax attorney for advice.


  • Debt settlement companies are potentially fraudulent and largely unregulated. Look for members of The Association of Settlement Companies and Better Business Bureau that have in-house attorneys. Avoid companies that refer you to third-party businesses for customer issues, guarantee results or won't disclose fees. Requesting debt settlement may result in your creditor immediately filing suit rather than negotiating a settlement amount.

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Carolyn Williams began writing and editing professionally over 20 years ago. Her work appears on various websites. An avid traveler, swimmer and golf enthusiast, Williams has a Bachelor of Arts in English from Mills College and a Master of Business Administration from St. Mary's College of California.

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