Can You Negotiate Credit Card Debt?

We’ve seen the heartbreaking stats of skyrocketing credit card debt – the average balance on credit cards hovers around $5,000 as household debt boomed the most in nearly 15 years in early 2021.

Too many are quick to shake their heads at the irresponsibility of these consumers; in reality, much of this debt reflects the need of households to stay afloat amidst the economic turmoil of COVID-19. 

If you or a loved one has found yourself underwater on credit card debt, you may be tempted to ask – what can I do to get out of this situation if I simply don’t make enough? Can I negotiate my way out of my credit card bill and reduce my debts?

The short answer is – YES.

At least in most instances; each credit card company will have their own policies in place.

But it comes with some big caveats.

You’re able to negotiate a settlement for debt, but consider the long-term implications; settling on your debt could have the effect of negatively impacting your credit for as long as 7 years, dramatically impacting your ability in the future to qualify for favorable mortgage loans, as just one example. 

It may not be an ideal option, but ultimately settling your bill will most likely be viewed more favorably by future creditors than an outstanding balance in perpetuity. 

You may have no choice but to pay off or settle your bill if you are in the process of applying for a home mortgage for example.

You may want to consider some other alternatives before negotiating if you are in a dire place with your ability to pay off your credit card. 

Consider reaching out to your credit card company to first ask what programs or options they have in place for those who are having challenges making payments on their monthly bills. 

For example, you may be able to potentially request a lower interest rate to ease your burden of payment.

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Other options could include:

• Forgiveness on those pesky fees hitting your account, like late payment penalties
• Reduction in the minimum payment you owe each month
• Temporary forbearance to give you time to build up savings or consider new options for paying your card off 

If you ultimately need to settle on your credit card bill, you have options in place to slowly rebuild your good credit. You can begin by making your future payments on time, quickly paying off any new debt, and keeping low credit utilization – i.e. only tapping into, say, 30 percent of the credit you are entitled to on your credit card. 

Before making a decision to negotiate on your bill, consider speaking to a financial advisor or credit counselor, who can help you walk through your options from an objective perspective. 

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