If you’ve been following the early tips I suggest for how to prepare to negotiate and settle directly with your credit card bank, you are already aware that most of the heavy lifting of the settlement process will be when you are between 150 and 180 days late on your credit card. If you have not read my previous article in this guide, What to Say to Bill Collectors, please do so now. Speaking with debt collectors is a vital component of being able to settle debts on your own.
NOTE: This post is part of our Debt Settlement Guide. If you’ve missed any of the previous content, or would like to start at the beginning, please see the links at the bottom of this page.
Before I get in to how you can go about targeting the amounts you’re most likely to settle at with each of your creditors during negotiations, I want to make something abundantly clear.
Settling Debt for Pennies on the Dollar
The internet is both friend and foe when it comes to looking for information about settling credit card debt. You will have no trouble finding websites, and offline promotions, of debt negotiation programs enticing you with claims that credit cards can be settled for pennies on the dollar. But if you define “pennies on the dollar” as 10 cents or less – it just doesn’t happen.
There can be one-off situations (mostly during the height of the economic downturn that began in 2007), where very low settlements could be achieved with some select lenders. But it is not the norm, and certainly not today.
If you have come across content or advertisements suggesting you can settle at these low – Low – LOW rates, you may want to forget anything else the source says about negotiating and settling. Targeting unrealistic settlement amounts is a good way to blow the opportunity to settle with your bank. Anyone leading you to believe that you can settle debt for pennies is more interested in selling you something than giving you accurate expectations and information.
Soapbox interlude about debt negotiation content online: Be careful of taking something you read too literally. Anonymous information is hard to verify, and information may be dated. While one national bank may have been settling for 40% in 2010, you may be able to target your negotiations with that same bank at 30% today. Conversely, a bank may have made settlements with many of their card holders for 15% to 20% at the height of the recession, but now rarely go below 30%, and more often will settle at 40% prior to charge off. It is far better to look for current information regarding your creditors and collectors. It is also best to not read too much into anonymous posters from yesteryear when it comes to negotiating settlements that impact you today.
How Much Your Bank Will Settle for
Each credit card lender will treat monthly payment reductions, collections, and negotiating settlements a little differently. But the similarities between credit card lenders policies for settling will generally take you as far as the amounts you should realistically target for each account.
Having reasonable and real time trend-based expectations for how much of a savings you can negotiate each of your credit cards for makes planning and succeeding with your goals obtainable.
By now, you should have a grasp of the fact that settling credit card debt is not rocket science. But there is a basic formula to follow in order to maximize savings and limit risks. The more creditors you have, the more important it becomes to strategically plan for which accounts to negotiate with first, and which would be better settled with outside debt collection agencies (after charge-off).
How you develop your plan should be based on how much money you have available to settle for the best rate of savings – given your particular lenders policies at the time you are negotiating with them – set beside any credit cards you have with a lender that is more aggressive in collecting.
Two ways to get help targeting and prioritizing what to negotiate for, and who to negotiate with first:
- Post questions in the comments below, or better yet, search for your creditors name in the upper right search box on this page and find a page dedicated to that creditor and read through what others are doing and post questions in the comment section there.
- Call me at 800-939-8357 ext 2, or schedule a consult (top of page menu) with me where I can provide a basic outline over the phone.
Who You Call to Settle Your Credit Card Debt
With your list of credit cards prioritized, and your timing set, making your calls to negotiate will start like prior calls I have suggested. Different creditors have different departments that handle delinquent accounts. In the first month or three of missing a payment, your calls may be handled by the bank’s customer service department. After 90 days of non-payment, calls are often routed to, or made by, a department that handles bank recovery.
Your bank’s recovery team will be who you are able to settle with. The number you call when you are ready to negotiate the settlement could be:
- one you received in a collection notice from your bank recently.
- the number on the back of your card (you will get routed to the department handling collections and recovery).
- dependent on the creditor – your account may be out with a collector even before the account charges off, in which case you may be calling a collector, are get routed to one when you call in.
What to Say When Negotiating Your Settlement
Take a moment to watch this video I did about what to say, and stay away from saying, when you are talking with a debt collector.
The previous article should have helped you with your frame of mind when making the call to negotiate and settle. You may start your negotiations with a simple restatement of your financial situation. If you have made prior outreach calls to your bank up to this point, your story of personal hardship is what you will repeat. This time however, and depending on what your notes say from prior calls, you can either:
- Repeat an offer that may have been made to you in the past (early on a bank rep may have said the account could be settled for say 60%), or you may have gotten a piece of mail from the bank offering some vague reference to settling, or a hard number or percentage. In this case, you simply start off by saying “I am following up on that earlier offer to settle. I tried everything I could think of to raise that amount, but fell short. I did come up with $_____. If that could be accepted as settlement, I can pull that together pretty quickly.
- Bring the subject of settling yourself by saying something like “I broke down and shared my situation with family/friends. They suggested they may be able to help me with a loan. They do not have much to give, but maybe enough to settle with. Is that a possibility?
There are many ways to bring up the subject of settling when you call in. When you’re calling in to negotiate and are between 150 and 180 delinquent, you will typically be speaking with someone trained to help you with that. You should already have a good idea of what the bank you are calling to negotiate with will reduce the credit card debt to in a settlement. Your offers to settle should NOT be verbalized as percentages, but as round dollar figures that are short of, or really close to, the low end of what that bank is known to approve and accept.
Answering Questions When Negotiating
A few years ago, some credit card issuers started asking a litany of questions before agreeing to a settlement. The list of questions is similar to what they ask in order to enroll you in a long term hardship repayment plan. You need to be prepared to answer these questions. Information about your income and basic expenses should prove to them that you are in the red and unable to afford anything other than the settlement.
People working for your credit card banks internal recovery department, and outside third party debt collectors, have real time access to your credit report. During the negotiation call you may get hit with questions about other debts that are not being paid, and certainly about debts that you continue to pay (house payment, auto, and even other credit cards). How you answer questions about other debts that you are paying is often going to be common sense.
Depending on the question asked, you may respond with something like:
- “Of course I am making my mortgage payment. I would be homeless if I did not.”
- “If I quit making the car payment, they take the car, and I have no way to get to work/look for work.”
- “That other credit card is not getting paid by me. My brother needed help and he is the one that made those charges. He is the one with the money to pay that one.”
- “That credit card bill is only $20.00 a month. That one is getting paid because I can afford that. I could not qualify for your lower monthly hardship payments, which is why I am willing to pool all of my resources, and even borrow money from family to settle if I can.”
Answering questions when on the phone with your original creditor, while trying to negotiate and settle your credit card with them before they charge it off and drop your account into the external collection pipe line, is normal and okay to do.
What if you call in and are told the bank is not settling accounts at this time, or that your account does not qualify for settlement at that amount, or at all? This can happen. Here are some reasons why it may happen to you:
- Your math regarding how many months you are behind added up to the perfect time to call and negotiate, but the banks math says you are 1 or 2 months less behind than you thought. Ask how many days late you are to confirm this.
- You just look more collectable. It sounds funny when you are not paying on time, I know. But if your balance is say 5k, and you are paying other credit card bills, your account may be flagged and can mean no negotiated settlement. You may have to settle with an outside collection agency in a month or three.
- That specific creditor is just not doing any settlements. It happens. They are not required to settle with their card holders. Refusing to is their prerogative. It is not common to flat out refuse settlements in today’s economy, but it sure was 10 years ago. American Express is a good example of a bank you may not be able to settle with directly.
- Sometimes you may be dealing with an original creditor who refuses to settle at 165 days late, but who is suddenly willing to negotiate when you call in and are 174 days late.
- You may have had account activity leading up to stopping payments that the bank finds questionable or red flags. This can include balance transfers, cash advances or large dollar transactions.
There are ways that a professional can help you work around these issues, so do not rule out getting help when you need it.
Negotiate Credit Cards Before Charge Off
You know that the first and often best opportunity to negotiate and settle for the lowest payoff will be with your bank, and prior to your account charging off. The better you understand why you should target as much of your debt negotiations with your original lenders, the more strategic, committed, and proactive you can be in raising the money you will need. You will want to understand how and why to prioritize some of your accounts over others for earlier negotiation. You should also know that it is okay when some of your debts progress into later stages of collection. Some of your debt may in fact be best negotiated and settled in 2nd or 3rd stage collections.
Do not hesitate to get help and feedback when prioritizing the debts you will negotiate first, second, third etc. You can do that by participating in the comment sections below, or on any of the pages you visit on this site.
You should know that it is best to be prepared to pay your settlements from a separate bank account that you set up specifically for this purpose. Having your “set aside” account set up in advance is just good planning.
Negotiating with Third Party Collection Agencies if Your Account is Not Charged Off
There are circumstances where your creditor will send your account out to a third-party debt collector before they charge off the account. American Express is the best example of a creditor who does this. Nothing much is going to change in your approach to negotiating an account that gets sent out for collections early, but that is still less than 180 days delinquent. There are a couple of subtle things to be aware of when negotiating with contingency debt collectors.
The next stop in our guide is not so much a “how-to” as a “need to know”. When wanting to settle debt after charge off, it’s important to know what to expect from your lenders, in terms of their policies, current trends, and collection practices.
Next is learning how the top 7 banks handle debt settlement, and setting realistic goals for your negotiations.
If you have questions and concerns about settling your debts at this stage of collection, and moving forward, post in the comments below for feedback. If you would like to talk over your situation with me you can reach me at 800-939-8357, choose option 2. You can also submit the “talk to Michael” form in the sidebar.
This Debt Settlement Guide includes:
An Expert Guide to Credit Card Debt Settlement
How and Why Banks Settle Credit Card Debt with You
Types of Accounts to Include in Your Debt Settlement Plan
Why Settling Credit Card Debt is Like a Race
How to Settle Credit Card Debt Quickly
How to Talk to a Debt Collector
How to Negotiate Credit Card Debt Successfully Yourself (you are here)
7 Largest Credit Card Banks and How They Settle Debt
Get Debt Settlement Letters and Agreements from Collectors
Paying Debt Collectors After You Negotiated a Settlement
I’m talking to Client Services for Chase.
I owe 1800, the offered me a settlement of 1300. My question to you is..is this a good deal, or should I try to get more shaved off?
I would definitely seek a better settlement outcome than this.
My target in this situation would be less that half, and by quite a bit.
You can often get payment terms on the settlement, which can make it more doable based on monthly cash flow.
If you run into trouble settling yourself you can submit a single account by clicking the get debt help tab in the upper right, and creating your user profile to submit to a negotiator.
The fee is 15% of whatever is saved in the settlement.
I have a number of debts, but have finished off a couple and negotiated a better deal
with Bank of America’s collection lawfirm.
Now my next focus is Paypal, but they want all of the settlement ($2100of $2900) in a 3 month plan.
Do you know if they will do a longer term plan?
How many months late are you on the Synchrony account?
Michelle,
I was wondering if you had a chance to see my previous post dated July 3rd at 1:11 pm.
Please advise if you could point me in the right direction, that would be greatly appreciated.
-Dan
Michael,
Thank you for the informative video..
I’ve have been put on disability twice within the last 4 months.
Over time I’ve managed to rack up the following and now in a pinch to make all payments.
1.Chase slate $ 14775 (3 months behind)
2. Chase freedom $3782 (up to date)
3. Wells Fargo $ 8987 (up to date)
4. Credit union master card $9890 (2 months behind)
5. Citi bank (best buy) $ 4624 (up to date)
6. Lowes $600 (I just made a payment after being late 3 months, the guy I spoke to on the phone told me he would be able to waive all late fees if I made a payment of $183, which was the amount that was required to bring up to date) .
The above amounts to approximately $42,454..
Initially I was going to look into getting a credit card consolidation loan at a low interest rate, a couple years back I was able to get a loan from best egg at %2.00 and have since paid that off. But I’m afraid that my recent late payments may prevent me from doing that.
I have been exploring other options and stumbled upon “debt reduction services” I called them and they were able to get me a quote. It seemed like a good option but after doing the math I would be paying 53 payments at $943/ month. That would amount me paying almost 7 grand in added fees after 53 months, yikes!
Well I did dome research and found out that these so called “debt reduction” services just negotiate with my credit cards and get a lower interest rate then close out the account.
The quote that I was given by this “debt reduction” service is itemized by credit card and has its respective new negotiated APR..
My question is:
Can I call my credit card companies and ask them if they can honor these new apr’s directly to me? That avoids me paying the $35 per month fee that I would be paying the “debt reduction”
Also, quick observation on the vague quote that was given to me:
The quote has a $ 35 per month “monthly contribution” ($35×53=$1885) I have no idea where that other $5100 is going to.
I’m 39 years old and up until recently my credit score was excellent.
I am expected to make a full recovery and my job has been very supportive of me in regards to holding my job..
I’m in the process of creating a plan and putting my finances together to see what I can afford.
I’m am prioritizing my expenses with my mortgage being 1st priority. Every other expense will be prioritized upon creation of my plan.
The $943 per month that this “debt reduction” service seems a little tight but if I can get that $35 monthly contribution fee cut and some how get my payment to $825 per month, I know I can do that. I might be able to do more, I will know for sure after I’ve created my plan..
Can you please help me out with some advice?
I would like to get this under control so I can focus on my health and get better.
Thank you sir!
It sounds like you are talking about a debt management plan working with a non profit credit counseling agency. The $35 a month is nominal compared to other debt relief services (other than chapter 7 bankruptcy being the most bang for your buck). But it is true you can often get your banks to do that directly with you (lower your apr) once you are already late like you are.
Talk to your banks.
They will walk you through a prepared script of monthly budget and expense questions. You have to be able to show you can afford your basic needs and still pay them, even if at zero interest. If not, they are not going to offer you a plan.
You also do not want to show that you can afford the basics, their payments, and still have several hundred dollars of “walking around” money. They will not offer you their best plan.
What concerns me about what you shared is that $35 a month is a make or break. If that is the case, a debt management plan, or your own version of a hardship plan direct with the bank, is not a great idea. You cannot miss payments on these plans, or they will not honor them.
If the payments are just too tight, you may be better off settling with creditors. But at least you can start off on the hardship plan and change into debt settlement.
Hi Michael-
I have two questions for you:
Question 1: I have $1300 in collective charged off account debt, one from Target (almost at the 7 year mark) and one from Cal Coast CU (also at the 7 year mark soon). Is there any way to get them to change my account status to not reflect a charged off account if I pay the balance in full?
Question 2: I settled an account with Sprint a few years ago and now they are saying their new debt collection company they sold my account to does not do “settlements” so I owe not only the remainder of my balance but it has been accruing interest for a few years now and it just showed up in my credit report, when it wasn’t there before. Not sure how to approach this one (also over 7 years so it should not be reporting on my credit report ,they refuse to remove it they said) It used to say paid in settlement on my credit report. Any advice how to handle this?
Thanks.
No, they will not reflect paid in full. Why do you need them to?
I would file a complaint against the collection agency for the Sprint account with the CFPB. More on that here: https://consumerrecoverynetwork.com/filing-complaints-with-the-cfpb/
Hi Michael. Your advice on credit card debt settlement has saved me thousands of dollars. I still have one issue I would like to ask you about.
I have an installment loan that is 160 days past due with a company called Bread. The balance is around $1200. They have already reported to the credit bureaus that the account is charged off, however they still own the debt.
I spoke with an account representative and inquired about having the reporting status changed and was told that The chargeoff status will remain but the balance will be updated to $0 after resolving the account balance.
Should I bother with paying this account with the original creditor or try to make a similar pay for delete offer to whatever collections agency ends up buying the debt?
Thanks
If it were me, I would settle with the original creditor and get the zero balance reported. If they sell to a debt buyer they are likely going to show a charge off zero balance then too, so this ends up the same, but sooner, and potentially for less than the debt buyer may have settled for.
Hi Mike, thank you for the videos and articles. One of my credit cards (Barclays) was sent to Northstar Location Services. I have not been able to make a payment since last May (hardship and now self-employed so money goes up and down) Total is $8550. I am trying my hardest to get back on track. After receiving the first letter from Northstar on the 1st of this month and receiving phone calls, I talked with someone there around the middle of this month and they offered a settlement at around 50%. Is this a general percentage that they settle for? Once we agree and I receive a confirmed settlement agreement in writing, do I send a cashier’s check for the amount to Northstar or to Barclays?
I would aim for a lower settlement if it were me. Something more along the lines of 35%. At the bottom of the article above there are links to how to pay your settlements, and what to look for in a settlement letter. Review those resources.
I personally would pay any legitimate debt I am settling directly from my bank account so I could track it and have easy access to proof I paid (as long as I have the agreement in writing already).
Hi, my credit card is with HSBC NEVADA BANK its only 798$ I owe from 4 years ago!! I want to settle but not sure how to approach them as far as what they will accept! What do you think?
Do you know if your account went to Capital One or not? Can you tell me the name of the last debt collection company that contacted you via phone or mail about this?
What is the percentage that Credit One will generally accept on a credit card debt?
I would estimate 40%, but still aim for lower.
Dear,
sir
i have 29000 dollars debt in credit cards please help me what can i do?
Post a list of your debts and include the creditor name, balance, and if you are late already, by how many months. I can offer you suggestions and feedback once I have those details.
Credit union wants to settle for 75% of original loan they have a judgement on me that was not properly served. Original debt was charged off to profit and loss 7 years ago stoped making payments 3 years ago 3 years to date Was served with a judgement in the mail with no prior knowleged that they filed a law suit just a judement arrived by mail.
What state are you in?
Hi Michael,
I currently owe about 17,500 on a CitiBank credit card and it will be 5 months late in a couple of days. They offered 50% settlement split into 3 payments, but the offer expires tonight. I am still not sure If I can gather the funds yet. Will they be willing to offer a lower settlement if I wait until next week, but before the 6 months?
You can probably negotiate the deal a bit lower too.
Hi Michael,
I have contacted Amex to talk settlement on two accounts. The one I have started negotiations on is for $1833.66. I was offered a settlement for 87.50 up front, 400. by Jan 27 and 487.50 by the Feb 28th. Total $975. I told them I needed a week to see if I could get the money together and would call them back on Friday the 20th. The negotiator I was working with reverted to shaming statements towards me but I did not bite and just continued with working on a payment settlement that would be good for me. I feel that this settlement offered may be the best I can achieve. It’s about 53%…what do you think. Also, I want to settle on a different Amex account but will not have funds for a while after I pay for the one I am working on. Should I contact Amex about the second account and talk to them about my situation? I already asked if they would combine the two accounts and they will not.
Louise
What is the balance on the second account?
When is the last time you made a payment on both accounts?
The second account balance is $3370.98 and the last payment was made 8/13.
Last payment on the 1833.66 account was also 8/13.
If you cannot raise the money to settle the next one yet, I typically hold off with negotiations. If you got them to agree to 50-ish percent, and a few months to pay, when would you be able to start paying on it?
I would want to find out if AMEX still has the account internally, or if it is out with a debt collector, and who that collection outfit is.
I’m pretty sure Amex still has the accounts internally. I would be able to start paying the 1833.66 account this month as I discussed with the representative. I did try to get him to split the last $487.50 due at the end of February into two payments but he would not agree. I will try again when I call back on Friday. You raised concern with Amex and how they may take legal action before other banks. That’s why I thought I should communicate with them about the second account and have some kind of discussion with them about settling, even though I won’t have the funds together for a few months. To be clear, are you saying don’t do anything until I have at least 40% to settle?
You can talk to AMEX about settling that second account, but they are going to do what they do with it because you will not have the money to fund the settlement. You will have more opportunity, and that includes with a collection law firm. Third party debt collectors can often provide more flexible options and payments when negotiating AMEX accounts (better than American Express will directly).
It is okay to let things go to collectors, and to accept the fact that you cannot avoid it.
Hi Michael. Thanks in advance for your help. I am recently divorced and lost 130,000 in yearly income. Needless to say, credit card bills are almost impossible to pay. I have 2 Citi cards. Balance #1 is $8,203. Balance #2 is $6,245. Chase card is at $7,849. And lastly, a discover card with a $4000 balance. I recently came into about 10,000 via a marriage settlement (house refi). I’m a month late on both Citi cards. All else is current. What’s the best you think I could settle for with a lump sums? Thanks so much for your help and response.