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How to Negotiate Credit Card Debt

For some people, understanding how to negotiate credit card debt may be a great first step for getting their finances back in order. You’ll have to contact your credit card company and know who to approach, what terms to ask for, and where to go if you need more help. However, remember that each credit card company is only interested in getting back the money you owe them. They are not looking at your entire financial situation or your relationship with other creditors. That’s why it’s important to consult a certified credit counselor when considering debt relief. At times, consumers who only have one credit card with a high interest rate, choose to negotiate their debt with their creditor. Here’s how you can take the steps necessary to do just that, and reduce your credit card debt burden.

1. Know what you want

Before contacting the credit card company, take a careful look at your existing income and expenses. Do a budget and figure out how negotiating your debt will help you reach your financial goals.

For example, you may need a lower monthly payment. Or, your goal may be to eliminate all your debt with one large payment. When, you have a clear understanding of what you’re trying to accomplish, it can make negotiating with a credit card company easier. Here are some different options that you may want to try:

a. Ask for a lower rate. If you’ve been making payments on time, you can ask your credit card company if they’d be willing to lower your interest rate. This could in turn reduce your monthly payment. With a lower rate, more of the money you pay would go towards paying down your principal balance instead of going towards interest.

b. Ask to skip a payment or two. If you’re having a temporary financial setback, but you expect to get back on your feet within a few months, you can ask your credit card company if you could miss a payment. If you are able to work out this type of arrangement, make sure you understand how the skipped months will negatively reflect on your credit report.

c. Make a settlement offer. If you have a chunk of cash, but it’s not enough to pay off your entire balance, ask your credit card company if they are willing to accept a lesser amount  as payment in full anyway.

This means you’d be making a lump sum payment, and the credit card company would agree that this amount satisfies the debt, and they would forgive the remaining balance. This option is more suited for customers who are behind on their payments and are not able to pay their debt in full. Be sure to consult a reputable debt relief provider such as CareOne to learn about your options and to find out if settlement is the right solution for you. 

2. Ask to speak with a manager

Once you decide what you want to ask for, the next step in knowing how to negotiate credit card debt is to make sure you’re speaking to the right person from the credit card company. The first person you speak to when you call a creditor will likely be a customer service representative. You may find that this person probably won’t have the authority to work out a deal with you. But don’t give up.  Instead, ask to speak to a manager or someone who is able to make decisions. Some companies have designated departments that are dedicated to helping customers work out arrangements.

Whether you believe they can help you or not, be sure to write down everyone’s name, title, and telephone number. After each conversation, record the day and time that you spoke with a person, and the details of your conversation.

3.Work with a debt relief company

If you’re unable to negotiate with a credit card company to your satisfaction, if you don’t want the hassle and stress of calling the lender, or if you want to work with a company that considers your entire financial situation, contact a debt relief agency with professionals who will work with you. Reputable companies have trained counselors who know how to negotiate credit card debt, and have relationships with credit card companies to help make the process easier.

Reputable debt relief companies that have been in business for a long time, such as the providers of CareOne Debt Relief Services, should have a solid record with the Better Business Bureau and should be willing to take the time to develop a thorough understanding of your budget and what you can afford.

4.Understand the consequences

If you are able to negotiate some of your debt, it could ease some of your financial burdens. But be sure to understand that there may be some drawbacks such as tax consequences. If you’re able to reach a lump sum settlement with a credit card company, and the lender forgives the unpaid amount, the credit card company may report the forgiven principal to the IRS on a form 1099-C, especially if it’s more than $600. You’d likely be taxed on that amount as income.

Finally, if you’re able to successfully defer payments for a few months, know that you will still have to pay back the money you owe at a later date, and you may even be charged interest during the period when you didn’t make payments.

5. Get it in writing

If you are successful in negotiating your debt, make sure you receive the agreement in writing so that there isn’t any misunderstanding in the future. When getting the information in writing, be sure to request they include when the account will be paid, what amounts will be paid, and whether or not the payments will fully satisfy the obligation. If you’ve both come to agree on a lump settlement, don’t send the payment until you have received assurance in writing that the agreed-upon amount satisfied your entire debt with that creditor.

If you’re trying to improve your finances, it’s important to know how to negotiate credit card debt. By having a clear understanding of what you will  be asking for, working with an experienced debt relief agency, and receiving all agreements in writing, you can help resolve burdensome debt and work on a developing a firm financial future. 

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