How to Negotiate Debt with Your Credit Card Company

Much like in work and life, sometimes, you have to stand up for yourself and speak up. When it comes to settling debt, this is absolutely the case. Simply put, you need to be your own self-advocate. "If you are finding it hard to pay your monthly credit card payment and your mortgage or rent, or if high-interest rates are making it impossible for you to get rid of the debt, it might be time to give your credit card company a call," says Colleen McCreary, chief people officer at Credit Karma. Rather than risk you ignoring the debt (which, in turn, will be handed over a debt collector) or filing for bankruptcy, the issuer may be willing to negotiate it down to a lower amount owed so they get back some of that money rather than lose it all—and this is to your advantage. Here, we asked McCreary how to work out a deal.

Itemize your accounts.

Understanding exactly how much you owe is the first step to settlement, so McCreary recommends that people do their homework—this entails going through all of your different credit card statements, itemizing the balance for each account, checking the interest rates for each, and having that list ready when you call.

Choose from the settlement options.

Before you pick up the phone, understand what settlement options are available and how much you can afford to pay. Card issuers are likely to agree to one of three types of settlements: a workout agreement, lump-sum agreement, or hardship plan. A workout agreement typically involves lowering your interest rate or temporarily waiving the interest altogether. A lump-sum agreement offers to settle your outstanding debt in one substantial payment, albeit at a lower amount than the original that was owed. A hardship plan is for those experiencing a temporary financial setback (think: a job loss or unexpected illness) and may lower your card's minimum payment, interest rate, or fees. It's worth noting that the choice you make will likely affect your credit score and some may even have tax implications.

Know what to ask for in the negotiation.

McCreary recommends a polite manner when making the call to customer service, asking for the department that handles debt settlements or collections. You may feel more at ease if you rehearse your speech before calling.

At first, you may be told "no," but McCreary recommends patience as well as persistence, remembering to document all of your calls and the person along with their titles whom you've spoken with. "Once, you've found someone at the credit card company who is willing to negotiate, make sure you get the terms of the deal in writing," she says. "The credit card manager you made a verbal agreement with may leave the company or your account may accidentally be sent to collections." It's also worth noting that this can be done through a third-party agency in which case you will be responsible for sending payments to the agency and may have to pay extra fees for the service. "Anything can happen," adds McCreary, "so protect yourself by putting it all on paper."