How do I Negotiate With Credit Card Debt?

Credit counselors can provide valuable advice.
i Jupiterimages/BananaStock/Getty Images

Negotiating credit card debt with creditors requires that you know your options and negotiate in good faith. Creditors are usually willing to negotiate reduced or extended payment plans if a customer is experiencing financial difficulty. Remember, credit card companies have taken a public flogging by assessing exorbitant fees and interest rates. However, there’s another reason they will come to the table; if your financial difficulties lead to bankruptcy, they get nothing.

Step 1

Review your credit card balance. Before calling your creditors to ask for debt relief, you’ll need to understand what makes up your credit card balance. Determine how much can be attributed to late and over-limit fees, interest and purchases. Credit card companies are most willing to waive or reduce fees first, due to the negative publicity such fees have garnered. If your interest rate is high, a creditor would first offer to reduce the interest rate for future charges before waiving interest that has already been assessed.

Step 2

Obtain your credit reports through one of several online services. You have the legal right to credit reports from all three credit-reporting agencies at no charge annually. In addition, if you’ve been denied credit, you have the right to attain for free the credit report on which the denial was based. Review your credit report, asking yourself if you would give yourself a break if you were a credit card company. For example, a new car loan may indicate that your financial situation is not dire.

Step 3

Contact a credit counseling service. Often, a credit counseling service will negotiate with creditors on your behalf. If not, they will provide valuable advice on how to go about the negotiation. Credit counseling services help you to understand your credit report. They also list the options available to you, including debt consolidation, budgeting and bankruptcy relief. Be sure to contact a reputable service. The U.S. Trustee program provides a list of approved credit counseling services at its website.

Step 4

Contact your credit card company. First, negotiate in good faith. That is, don't be overbearing or righteous. Most credit card company representatives are willing to help a person that genuinely needs help before the person making demands. Show that you’ve done your homework and examined your options. Also, indicate that you’ve reduced your expenses to the necessities. Indicate that you want to dig yourself out of debt before considering bankruptcy. Be careful here. If they believe you are threatening bankruptcy, they might shut down. Remember that the person on the other end of the telephone is a human who may not respond well to a threat. During your conversation, if a credit card representative recommends taking a loan against your retirement account to pay your balance, politely decline. It is never in a debtor’s best interest to do so, as bankruptcy laws protect retirement accounts. If it comes to this, bankruptcy may be the preferred option.

the nest