How to Negotiate Credit Card Debt

Quick Answer

If you're behind on your credit card payments, it's possible to negotiate the amount you owe. You can negotiate your credit card debt through forbearance, a workout agreement, a debt management plan or debt settlement.

A women is sitting on the couch while looking at her laptop and holding her credit card.

Credit card debt can be a significant financial burden, and if you've gotten to the point where you can't keep up with your payments, it may be worth trying to negotiate with your credit card issuer.

Before you call, though, add up your debt, review your options and understand the potential risks. Here are some steps you can take to negotiate your credit card debt and some of the issues that can arise regardless of the outcome.

1. Add Up Your Credit Card Debt

Depending on your situation, you may need to try to negotiate with one or more credit card companies. Take stock of your credit card debt by logging in to your online accounts and tallying up your current balances.

You may also want to note your monthly payments and interest rates, as this can help you determine which credit card companies to try to negotiate with first. Focus on the cards that are giving you the most grief due to a high monthly payment or interest rate.

2. Review Your Negotiation Options

There are a few ways to negotiate your credit card debt, depending on your particular situation and your goals:

  • Forbearance: If you're experiencing a temporary financial hardship, a credit card company may be willing to enter into a forbearance agreement with you. With this option, you may be able to qualify for a lower monthly payment, waived interest and fees, or even no payment at all for a short period. This can be a good option if you haven't yet missed a payment or if your account is only recently delinquent.
  • Workout agreement: If you've fallen behind on payments for some time now, it may be worth it to pursue a workout agreement, in which your lender agrees to renegotiate your terms. With this approach, the card issuer may agree to lower the card's interest rate or minimum monthly payment, or may even waive interest for a short period. 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. Then, 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, which can add up over time.
  • Debt settlement: If you're so far behind on your monthly payments that your accounts are at risk of being sent to collections—or already have been—you may consider pursuing a lump-sum debt settlement. With this option, you can negotiate to pay off an amount that's lower than what you actually owe, and the card issuer will forgive the remaining balance. Keep in mind that settling an account will have a negative impact on your credit scores. Even if you've always paid your bill on time, settling an account means it wasn't repaid as agreed. A settled account remains on your credit report for seven years, but the negative effect it has on your scores can decrease over time.

3. Understand the Risks

Whether or not you can negotiate the situation you want with your credit card debt, there are many drawbacks to keep in mind:

  • You may be unsuccessful. There's no guarantee that you'll be able to negotiate a better situation with your credit card companies. If that's the case, you'll need to find another solution, such as using a balance transfer credit card or taking out a debt consolidation loan.
  • Your account may be closed. Negotiating may help alleviate some of the financial stress you're experiencing, but the card issuer may decide to close your account. This would not only limit your purchasing power, but it can also damage your credit score, as the available credit on the card will no longer count toward your credit utilization rate. Also, if you start a debt management plan, the credit counseling agency may require you to close your credit card accounts so you don't take on additional debt.
  • It may only be a short-term solution. Some of the options you have to negotiate your credit card debt are temporary. If you manage to get a forbearance or a workout agreement in place, you'll still have to pay back the debt at some point. If your financial hardship lasts longer, you may end up with more debt than before.
  • It doesn't solve the original issue. Negotiating your credit card debt can address your current situation, but it doesn't prevent you from racking up more credit card debt in the future. You'll want to take steps to address your financial habits to avoid repeating history.

4. Call Your Credit Card Issuer

Call the number on the back of your credit card to speak with a representative in your card issuer's customer service department. You'll want to let them know from the start what your situation looks like and the arrangement you'd like to pursue.

While you may feel stressed, it's crucial that you be polite on the phone. Representatives may be less inclined to help if you're aggressive or hostile.

5. Get an Agreement in Writing

If you manage to come to an agreement with your credit card company, make sure you get it in writing. You can ask to get the plan in writing via email, a fax or a mailed letter. Regardless of the method, the deal isn't legally binding unless it's in writing.

How Does Credit Card Debt Negotiation Affect Your Credit?

While your credit score may have already taken a hit from past-due payments, there are other ways negotiating credit card debt can impact your score:

  • Closed account: If your account is closed, you'll lose the card's available credit. Your credit utilization rate, or the percentage of your available credit that you're using at a given time, is an important factor in your FICO® Score . If you don't have a lot of available credit on other cards, it could damage your credit score until you pay down those debts.
  • Notation on your credit reports: If you settle for less than what you owe, that'll be added to your credit reports, which can hurt your credit score and make it difficult to get approved for credit in the future. Even if you get on a forbearance plan or a workout arrangement, the credit card company may report that you're not paying as originally promised, which can hurt your credit score.
  • More late payments: Depending on how long it takes to negotiate, you may have more late payments racking up on your credit reports, which can harm your credit score further.

Should You Negotiate Credit Card Debt?

Negotiating credit card debt can help solve an immediate debt problem, but it can also create other problems. Think carefully about your situation and your options before you decide to move forward with the negotiation process.

Most negotiation options are best to consider only if you're far behind on payments and the damage to your credit score has already been done. That said, you may consider forbearance as an alternative to missing a payment. Remember, though, that payments aren't reported late until 30 days after the due date, so you'll have some time to come up with a way to pay your bill.

If you're unsure about which path you should take, consider speaking with a credit counselor, who can provide a free consultation and possibly help you come up with a plan.

How to Avoid Credit Card Debt

As you work to get rid of your credit card debt, it's also important to take steps to avoid taking on more of it in the future. Here are some tips to help you accomplish your goal:

  • Create a budget. Calculate your income and your monthly expenses and try to spend less than what you make so you don't need to rely on credit for regular expenses.
  • Build an emergency fund. In the event of an unexpected expense, you can use your emergency fund instead of turning to credit cards.
  • Only buy what you can afford to pay off. When taking on new debt or opening a new credit card, try to take out the smallest loan possible to fit your needs.
  • Make your payments on time and in full. If you are able to pay off your balances in full every month, you won't have to pay interest and your credit utilization will stay low, which can strengthen your credit score and keep you from racking up debt.
  • Set up automatic payments. Setting up automatic payments can make it easier to keep up with your payments. Plus, when you separate that money from your checking account, you're less likely to spend it and go into debt.

Make Rebuilding Your Credit a Priority

As you work to pay down your credit card debt, it's important to also focus on rebuilding your credit. Depending on how bad things have gotten, it may take several years to recover, so the sooner you begin, the better.

You can start by signing up for Experian's free credit monitoring service, which offers free access to your FICO® Score and Experian credit report. You'll be able to review problem areas that you can address and also track your progress.