Can You Negotiate Credit Card Debt?

Quick Answer

You may be able to negotiate credit card debt by submitting a request with your card issuer. Negotiating credit card debt may bring relief that harms credit less than bankruptcy and costs less than credit repair.

Woman looking at bills and receipts on floor

You may be able to negotiate with your credit card issuers to settle your debt for less than you owe. Any arrangement that alters your original payment terms can hurt your credit, but the damage could be less than if you default on your payments altogether.

Settling your debt will likely be less costly than hiring a for-profit "credit repair" service to negotiate for you as well. Before proceeding, take the time to understand how the process works as well as the potential consequences it can have.

Credit Card Debt Settlement Options

Debt relief options you can seek from your credit card issuers include:

  • Debt settlement: If your account has been sent to collections (or is about to be), it may be worth considering a lump-sum debt settlement with your credit card issuer. This entails offering the card issuer a one-time payment for less than your total balance. If they accept, the card issuer typically closes your account and reports the account to the credit bureaus as not paid as agreed. This entry remains on your credit reports for seven years and has a negative impact on your credit scores as long as it persists, although its negative effects will decrease over time.
  • Forbearance: If you're experiencing a temporary financial hardship, a credit card company may be willing to arrange a forbearance agreement. Forbearance grants you a short-term reduction (or suspension) of your minimum monthly payments and/or a waiver on interest charges and fees. This may be a good option if you haven't yet missed any payments or if your account is only recently delinquent.
  • Workout agreement: With a workout agreement, your lender agrees to permanently renegotiate terms of your cardholder agreement if you're behind on payments. The card issuer could agree to lower the card's interest rate or reduce your minimum monthly payment. Note that they may also lower your borrowing limit. This option can be worth pursuing if a lower monthly payment would work for your budget.
  • Debt management plan: A debt management plan is a repayment plan that's arranged by a credit counseling agency. With this type of arrangement, the agency may negotiate a lower interest rate or monthly payment with your credit card companies. Once the debt management plan is established, you'll make one monthly payment to the agency, which will disburse the payment to your creditors. In turn, the agency charges modest upfront and monthly fees, though these can add up over time.

How to Negotiate Credit Card Debt

The steps involved in negotiating credit card debt are fairly detailed, but in a nutshell the process works this way:

Prioritize Your Credit Card Debt

Depending on your situation, you may wish to negotiate with one or more credit card companies. Tally up your current balances, interest rates and minimal monthly payments so you can prioritize your efforts and evaluate the benefits of proposed changes in minimum payments or interest rates.

Consider Negotiation Options

Review the debt relief options listed above and, for each account you hope to address, decide on the approach that makes the most sense. Be realistic about your ability to make payments and try to have target numbers in mind if you're seeking a lower minimum payment or a reduced interest rate. If you're seeking temporary forbearance, think about how soon you expect your temporary hardship to end and be prepared to give the card issuer evidence that you'll be able to resume payments when you say you can. If you're proposing a lump-sum settlement, you may be asked for proof that you have sufficient cash to complete the deal before proceeding.

Know the Risks

Negotiating credit card debt can be tricky, and it's not without significant drawbacks. Before you begin the process, make sure you're aware of potential consequences:

  • The card issuer may refuse. Credit card companies are under no obligation to provide settlement or debt relief options to customers. If your proposals are turned down, you'll need to consider other options, such as using a balance transfer credit card, taking out a debt consolidation loan or perhaps even filing for bankruptcy.
  • Accounts may be closed. Many settlement negotiations end with the card issuer closing your account or lowering your borrowing limit. This curtails your purchasing power and can damage your credit score by reducing your total available credit and increasing your credit utilization rate. Similar consequences can come with debt management plans, as credit counseling agencies may require you to close your accounts to prevent taking on more debt.
  • Core problems may remain. Relief from debts may not address the underlying causes that led to high balances in the first place. Whether your credit card debt is rooted in financial difficulties, impulsive purchases or other factors that prompt overreliance on credit cards, you may need to examine and change your financial habits to avoid racking up more problem debt in the future.

Call Your Card Issuer

Call the customer service phone number on the back of your credit card to reach a representative. Explain your situation and the arrangement you'd like to pursue. Practice this with a friend ahead of time if you're nervous and try to be clear about what you want without getting impatient. Representatives can and likely will decline to help if you're aggressive or hostile.

Get Any Agreement in Writing

If you come to an agreement with your credit card company, make sure you get the terms in writing, via email, fax or a hard copy by postal mail. No deal is legally binding unless it's in writing.

How Settling Credit Card Debt May Impact Your Credit

All of the settlement options listed above involve deviating from the terms of your original cardholder agreement. So, even if your card issuer agrees to revise those terms, they'll likely report the changes in account status to the national credit bureaus (Experian, TransUnion and Equifax).

Settled accounts, accounts closed at the issuer's insistence and even account forbearance can appear as negative entries on your credit reports, where they'll remain for up to seven years. Negative entries can cause harm to your credit scores as long as they remain on your credit reports, but the severity of their impact will tend to ease over time. You can check your credit score for free through Experian to see where you stand.

The Bottom Line

Negotiating your debt with credit card companies can be daunting, and it's not without risks, but it's worth trying if you're overwhelmed with debt. If successful, it can bring welcome relief that does less harm to your credit than bankruptcy and costs less than for-profit credit repair services. If you pursue this path, it'd also be wise to reflect on the root causes of your debts, and consider taking steps to prevent future credit card missteps so you don't get in over your head again in the future.