How to Negotiate Credit Card Debt with Collection Agencies

How do you negotiate credit card debt with collection agencies? Well, this article will explain in details how to negotiate credit card debt settlement yourself.

According to NerdWallet, the average household in America has $15,191 in outstanding debt. This explains why living under debt has become the norm for many people in America and in many other countries. So, if you are presently wallowing in a mire of debt, you are not alone—there are several thousands to millions like you.

Now, let’s face it. You will find it hard to invest and build wealth for yourself and your family if you have a huge credit card debt to settle. Before you can move forward financially, you must destroy your credit card debt.

A certain technique may help you tremendously if you are finding it difficult to pay back your debts and are on the brink of despair. It’s called credit card debt negotiation. In some cases, this technique can help you wipe as much as 75% of your credit card debt balances without you having to declare bankruptcy.

Debt collection agencies (also known as debt collectors) are third party companies hired by credit card companies and other credit issuers to collect the debt owed to them by debtors.

Creditors typically resort to hiring debt collection agencies after taking various measures to get their money back, but without success. So, they give up collecting the debt, but they hire third party collectors if they still need the money or sell them the debt if they have given up totally.

Once a debt collection agency takes over the task of acquiring the money you owe a creditor, you will start getting constant calls, letters, or emails from representatives of that collection agency. Since the goal of the agency is to get you to pay back the money by all means, it can go as far as suing you to obtain the money.

Having debt collectors at your neck is usually not a good experience. Only few things are more frustrating than frequently receiving multiple calls, emails, and letters reminding you of your debt and even threatening you with all sorts.

If you have a debt that is being pursued by a collection agency, you can often settle it for less than the amount owed. But you can only achieve this if you know how to go about making settlements with collection agencies. The following guidelines will be of help:

How to Negotiate Credit Card Debt Settlement Yourself with Collection Agencies

Your first step towards negotiating your credit card debt is to gather information about your debt situation. A good step towards negotiating a settlement with a collection agency is to validate the agency’s claims by sending it a letter requesting that it send you proof you owe the debt. This is to ensure that you are dealing with genuine debt collectors and not fraudsters who only want to take advantage of their knowledge about your debt.

After getting a reply from the agency, you must verify that the debt is yours and accurate by ordering a copy of your credit report. The Transition report is the best, as it has complete account number. Your credit report typically shows the amount of debt you owe and gives the contact information for each creditor. You can then proceed to file a dispute with each of the three credit bureaus.

If they cannot verify that the debt is yours or correct, they must delete it from your report and notify you of the action. And in such case, simply send a copy of that notice to the collection agency, telling them to stop contacting you over the debt.

But if the debt is yours, you need to calculate how much debt you are owing in total. Make a list of the creditors or collectors holding these debts. Note the original amount of the debt as well as how much the debt started off as before fees and interest. You will need all of these information in your communication with the creditors while trying to negotiate your debt.

Organize all the information you have gathered about your debts and prepare a log that you can use to track your progress. You should have easy access to all information about your debts so you can quickly reference it in case a creditor calls you.

Figure out how much you have gathered for settling your debts. In addition, find out how much you can afford to pay towards debts each month. You must set a budget that is realistic for you. Ideally, you will want to pay debts off at once, called “settling in full,” so plan to have certain amounts of money over time.

List out you debts starting with the most important down to the least important. However, you must bear in mind here that importance might not necessarily be related to amount. Importance actually means how urgent the debts need to be paid. Your most important debt, that is the one you should attempt paying back first—is that which you are called about the most or the one that has reached a law firm.

You should create a special account where you will save the settlement money so you don’t use it for something else. But you must bear in mind that it is best to have a decent amount of money to offer (say 30 to 50 percent) before you start settling your debts.

3. Contact the collection agency

Get in touch with the debt collection agency—most preferably by phone—and ask to speak with a manager, supervisor, or someone who is part of the agency’s decision making team.

Insist on speaking with someone that is able to make decisions such as settling the account for less than the actual amount owed and deleting the item from your credit report. If you’re not connected with such an individual within the agency, end the call and phone back until you’re connected with someone you can start negotiation talks with.

4. Switch correspondence to letters or email

Once you are able to connect with someone within the agency that you can talk to about plans to negotiate, tell them that you want all subsequent communication to be made through letters or email instead of over the phone. This is because written text can be later used as proof should any misunderstanding arise during the course of the negotiation process or even after the negotiation.

After the collection agency has granted your request for a negotiation, start negotiating right away. Offer a percentage of the amount you are owing in exchange for the deletion of the debt from your credit report filed with the three major credit bureaus.

Make offers for those debts for which you have something to offer them. And ensure that your offer does not exceed your budget. Try to convince the company as to why they should accept your offer and give them strong reasons why negotiation is the only option you have.

Start your offer at 25 percent of the full amount owed or less. Even if the collection agency accepts that you pay 25 percent, chances are it will still gain a substantial profit—if it bought over the debt from the creditor. This is because debt collection agencies usually buy off debts at ridiculous prices from creditors who have given up on collecting such debts back.

For example, a collection agency can buy off a $1,500 debt for just $100. So, even if you offer to pay 25 percent off such debt (that is, $375), the collection agency still gains $275 despite the huge difference between the actual amount you owed and the amount you paid eventually.

However, you must bear in mind that reality will not always go according to your plan. So, don’t expect the company to accept your negotiation offer after just one phone call. You are actually the defaulter in this case, so you have to be civil, even if your offer isn’t accepted.

While making your offer, be careful of the information you give. Telling the person that you make $100,000 a year and you want to settle a $500 debt is not the best strategy. Stress your hardship and the way in which the balance has been exaggerated. And since most creditors will begin to call you more frequently during debt negotiation talks, don’t call from nor give them number you don’t want to be called on. If they reject your starting offer, raise it gradually until you both reach an agreement.

6. Send the money and close the deal

If your negotiation offer is granted, putting the agreement in black and white is the most important debt in the whole process. Once both parties have agreed on a mutually pleasing amount, you need to make a proof of the agreement. Always insist on the company sending you the details on the agreement on their letterhead. And be sure that the agreement mentions the details of your negotiations.

Once the collection agency sends you a letter or email confirming its acceptance of your offer, make a payment of the negotiated sum either by cashier, check, or online transfer. And keep the evidence of that transaction for reference purposes. Even after the agency has confirmed your payment, be sure to follow up with it if it delays removing the negative report from the credit bureaus. Having taken all these steps, send the money and have your debt settled.

How to Negotiate With Your Credit Card Company

Will credit card companies negotiate

Are you struggling with credit card debt? If yes, then negotiating with your credit card company can make a big difference in resolving the problem.

In this post, let’s talk about the proper steps of negotiating credit card debt.

Some people may be hesitant about the idea of negotiating with a credit card issuer. However, if you take the initiative to request for better terms of repayment, you may be surprised to find out that you credit card company can actually lend a helping hand.

There is no need to wait until the problem has become insurmountable before considering a negotiation with your creditor. If you have a good payment record with your credit card company and a good credit history, then call up your issuer to request for a lower rate.

It’s important to ask to speak with the right person who can make decisions regarding your request. Most customer service representatives will immediately say that it is not possible to lower your rate. Always ask to speak with the manager or the supervisor of the bank.

When speaking with the person in charge, explain your situation politely. Why would you like to get a lower rate? Let the manager know the advantages not only for you but for their company as well. Initially, the issuer may refuse to give in to your request. But do not give up and call again after a month or two.

Check out the market and get to know your options. Are there other credit cards that offer a lower interest rate? Is it possible for you to make the switch? Let your present issuer know that you are thinking about switching to enjoy better terms.

If you are in a debt where it’s not possible for you to pay your balance at once, you can try to negotiate for a settlement. Do not wait until your account has been passed on to a debt collection agency. Since these agencies make profit through collection, it will be more difficult to negotiate your debts.

Before calling your credit card company, seriously consider how much you can afford to pay and where you will get the money. Remember that once your issuer agrees to a settlement, you are expected to submit your payment right away.

When you’re ready, meet with your creditor and explain your situation. Propose for a settlement. Keep a record of you conversation and put the terms of agreement into writing. If you are not familiar with the process of negotiation, seek help from a trust debt settlement agency or credit counseling agency.

An App to Help You Negotiate with Credit Card Companies

I know what it feels like to avoid looking at personal finances. It’s even harder to come face-to-face with the reality of credit card debt and going in the whole each month.

I talk to people that are too scared to open credit card statements because the scene is just to ugly. This way of thinking can be bad for your financial health.

Taking Control of Your Money Through the Power of Negotiation

When you’re in a hole the first thing to do is cut and negotiate as many expenses as possible. If you want to cut expenses I suggest you start with the inessentials.

It’s amazing what a simple phone call can accomplish. Call your cable company, internet service provider, cell phone company, credit card companies and banks to negotiate lower rates and get excess fees refunded.

The other day I called my bank to ask them a question about one of my accounts. While I was on the phone I mentioned some fees that I saw in the account. The representative said that $40 of fees had been incurred and that he would gladly credit them back to my account.

I’ve talked about the power of “just asking” in an email that went out to newsletter subscribers (you should join). It can be hard to ask for what you want. Growing up I was taught to not ask for things and to be patient. I think that can do more harm then good for adults. It’s totally OK to ask for what you want.

Maybe you think this sounds great but you’re not sure about what to say to the person you’re negotiating with. I understand. If you’re not used to negotiating it can be intimidating and you might feel like you’re not worthy to ask for what you want.

A Free App for Novice Negotiators

First, let me say that you deserve to do your best and to live a happy life. Second, here’s a useful tool that will make this negotiating stuff easy. It’s an app called Negotiate It.

This app contains scripts you can use right on your phone as you call companies to negotiate. I’ve linked to the free version of the app which only contains three popular scripts. The paid app contains many more scripts but it is $4.99 (one-time).

In my opinion this is a great tool for people who want to stop credit card companies, banks, cable companies and cell phone companies from taking advantage of them.

If you don’t want to invest in the Negotiate It app then just call these companies and tell them what you want then ask them to give it to you. The worst thing that could happen is that they say no.

Imagine if you negotiated just one lower interest rate on a credit card. That could easily add up to hundreds of dollars saved over the course of a year. That’s a big help when it comes to paying off debt and saving money for the 52 Week Money Challenge.

When you complete a few negotiations your confidence will soar. You’ll feel more in control of your money and you won’t feel the fear gripping you like it once did.

Do something for yourself today and make one phone call to practice negotiating. You’ll be surprised how easy and fun it can be.

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How to Negotiate Debt With a Credit Card Company

by Amber Keefer

Settling credit card debt can hurt your credit score.

Negotiating your credit card debt for less than you owe can help get you out of financial difficulties, but it will also lower your credit score. Even when card issuers agree to accept less than the full amount you owe as a payoff, most will still report the number of days the account was delinquent. Although it will put a black mark on your credit report for several years, negotiating a smaller lump sum payoff may be less damaging to your credit standing in the long run.

Look over your credit card debt so that you know exactly how much you owe and how long your account has been past due. The length of time that your credit card has been in bad standing influences the payoff amount that you should try to negotiate with the creditor. Creditors often accept lower amounts for accounts that have been delinquent for an extended period. However, in most cases, creditors want to recoup 60 percent or more of the debt if it was only recently charged off.

Calculate how much of a lump sum you could pay for a credit card account that has been charged off. If you are unable to offer the creditor a lump sum amount, you need to come up with a reasonable payment arrangement to offer the card company. Make certain that you devise a payment plan that you can stick to if the card issuer accepts your offer.

Call the credit card company to let someone in authority know that you would like to negotiate your debt. Be ready to explain why you are behind in making your payments. Make it clear that you are serious about paying off your debt, but cannot afford to pay the entire amount that you owe.

Offer the creditor a payoff of about 25 percent of your total debt. Most creditors will not consider this amount unless your debt is very old. Still this gives you a starting point for negotiations. Some creditors will accept a payoff of about one-third of the original debt, although many creditors will want at least 60 percent of the balance you owe.

Propose the maximum amount you can pay if all else fails. Let the creditor know exactly how much you can pay even if you have to repay the debt through a payment agreement. If a creditor realizes that you really want to pay off your debt, the company is likely to consider any reasonable offer you make. Ask to speak with a supervisor if the customer service representative cannot help you.

Ask to see everything in writing once you reach an agreement with the creditor. Don’t make any payments until you receive a written copy of your agreement specifically outlining the payment terms. Forward a copy of this letter with every payment you make until the debt has been paid in full.

Negotiate terms if you are unable to negotiate the debt. Many credit card companies are willing to remove late fees and accumulated interest if those costs are preventing you from bringing your payments current. Some creditors may even offer you lower interest rates or better credit card terms. Agreeing to a lower interest rate so that more money goes on the principal may be the way to go. However, Barry Paperno, product support manager for FICO, explains that paying off the balance and closing the account could hurt your credit score depending in how much you owe on your other credit cards. Bringing an account current and keeping it open can help to improve your score.

13 Awesome Tricks for Negotiating Credit Card Debt

Negotiating credit card debt is an incredibly valuable strategy to help you get out of debt faster. Not only does negotiating debt help lower your payments, it also helps you take control of your finances where before you may have felt powerless.

When you have a ton of credit card debt, it can feel like you have no power against a large credit card company. The debt weighs on you tremendously to the point you’re not sure what to do.

But you DO have some power you can use to better your situation, no matter how much you owe. Negotiating credit card debt might sound a little difficult and intimidating. But once you know how to do it, it’s a great way to take away some of the financial pressure and speed up getting out of debt for good!

Below I’ll show you the most important steps to negotiate credit card debt and free yourself from the demon plastic forever!

Of course, I always recommend getting rid of credit cards completely and using cash only to finance your life. Angie and I haven’t used credit cards for over 10 years now. I can tell you from personal experience, it’s an awesome thing to not have to deal with managing credit card debt every month! We’ve seen great life changing benefits from this, such as:

  • We don’t have to worry about paying (and stressing over) another bill every month.
  • Money doesn’t get wasted paying interest on a credit card balance.
  • We don’t have to worry about overspending- EVER!
  • Peace of mind- no debt causing us daily stress.

I know there are people who will tell you credit cards are fine as long as you use them responsibly. But the statistics show that most people don’t do that. I haven’t found any good reason to use a credit card for anything, and I doubt I ever will. Cash is king at our house!

13 Tips for Negotiating Credit Card Debt

So if you’ve decided it’s time to get out of debt and you want get rid of your credit cards for good, here are some excellent tips on how to negotiate credit card debt and get it to a more manageable level. Not every tip will work every single time, but the more you use them the more likely they are to be successful!

We all get credit card offers in the mail. Instead of chucking them in the trash, you should hang on to these for a while. In fact, save as many of them as you can get your hands on, they will come in handy later.

Many of them offer a zero interest rate if you will transfer your balances to their card. Otherwise they will offer a low interest rate for a certain time period. Obviously, these offers are designed to get your business.

The great thing is you can make this work to your advantage when negotiating credit card debt. I’ll show you how to take advantage of that later in this post.

Next on the list is to get organized. Gather all your credit card bills together in one place. That way you can understand just how much debt you have. Write down each account on a sheet of paper with all the appropriate info for each account. Make a list with the following info for each credit account you want to negotiate. Here’s the info you’ll want on your list:

  • Name of the credit card companyWill credit card companies negotiate
  • The amount you owe on the account
  • The current interest rate you’re being charged
  • Customer service phone number for the account
  • Notes- Here you can write who you spoke to, what new terms you negotiated, etc.

Check to See if Any of Your Debt is Zombie Debt

According to Forbes, zombie debt is years old, and is entirely owned by a debt collection agency. Many times this zombie debt is past the statute of limitations, and you may not be held legally responsible for it.

One way to find out whether you’re past the statute of limitations is to request a Debt Verification letter from your creditor. You can ask for one over the phone or by fax. If you want to request a debt verification letter by fax, here is a template you can use for that.

If you don’t know what the statute of limitations is for zombie credit card debt in your state, you can go here to find out the details.

Try to Settle Before Your Account Goes to Collections

If you’re having trouble paying down your debt, it’s best to be proactive. You’ll likely have more success with debt negotiation if you try to settle your debt before it goes to collections. However, there is no way to know how a creditor will react once you make the call. Some will be willing to work with you, and some will not make any effort at all.

You should be careful about how much you tell them when negotiating your debt. If you lost your job or have had a family emergency, they may be more willing to work with you for a while. But if you tell them you just can’t afford to pay because you have too much debt, they may be less likely to help out.

If you have a job loss, illness, or family emergency, you may be able to negotiate a forbearance. Forbearance simply means the credit card company will allow you to stop paying for a limited amount of time until you can get back on your feet. Be careful though, your balance may still accrue interest during that time, increasing your debt further.

If Your Debt Has Gone to Collections

If your debt has been turned over to collections you may have a little more bargaining power working in your favor. By the time a debt gets to collections, they realize they’re not likely to get much (if any) of that money back. If this is the case, you can offer them much less than what you actually owe, and they make take you up on the offer.

This can work especially well if your bad debt has been sold to an outside collections company. These companies typically buy bad debt for pennies on the dollar. You could start your negotiations by offering them 25-30 cents on the dollar and work up from there. However, you should be willing to pay the negotiated amount as a lump sum. Most will not let you work out a payment plan.

Call the Credit Card Company With the Lowest Balance First

I believe it’s a good idea to start negotiating your debt by attacking the smallest balance first. This is because if you have never negotiated debt before, it’s good to get your feet wet where the stakes are smaller. Once you get to the larger debts you’ll have more negotiating experience and (hopefully) more chance for success!

  • Place a call to the customer service number for your credit card.
  • Tell them you’d like to get a lower interest rate and your annual fee eliminated if you have one.
  • If they ask why, tell them it will better help you meet your financial obligations to them without any interruptions.
  • If they hesitate to offer you a deal, tell them you’re considering other cards with no annual fee and lower interest rates. Tell them you’ll transfer your balance to one of those cards if they can’t negotiate a better deal with you.
  • If they still refuse, ask if you can talk to a supervisor. Sometimes the first person that answers the phone may not have the power to get you a lower interest rate. Someone higher up usually has the authority to negotiate better terms with no problem.
  • If they refuse to help, then don’t hesitate to transfer your balance to a card at another company with a lower interest rate and no annual fee.

When you make the call, don’t take no for an answer. If you’re easily discouraged by their “no”, then it saves them money. Be pleasant, but firm. Don’t talk from a position of weakness.

For example: If you say “I was wondering if maybe you could give me a lower interest rate?”, that sounds wimpy and probably won’t work. Speak from a position of strength: “I want you to give me a lower interest rate on my credit card and eliminate the annual fee. If you can’t help me out, I’ll be floating my balance to another credit card that has offered me a lower interest rate.” You might even mention specifically some of the offers you received in the mail from other companies.

If you sound passive and unconfident, they will roll right over you.

You might even want to practice the call beforehand, rehearsing what you’ll say and how you’ll say it. Of course, this technique may not work every single time, depending on your payment history and other factors. but if you’re firm and insist upon getting what you called for, you’ll find that it works quite often. You should understand this phone call might be a long one because they will put you on hold multiple times and even try to sell you alternate products.

Resist their sales pitches.

Be Patient- Remember the Ultimate Goal

Remember to be patient, nicely insisting on getting what you came for. You’ll find that negotiating a lower interest rate with this technique works more often than not. This kind of call (as with any call to a credit card company’s customer service department) may last as long as 30 minutes to an hour. But it’s a call that can literally save you hundreds, even thousands of dollars depending on your balance. That, my friends will help you pay off your debt that much quicker and get you further down that road to financial freedom.

Remember, the ultimate goal is debt freedom and a life free from credit cards!

Any time you negotiate a deal for a lower interest rate or to pay off debt, get the details in writing. A verbal agreement over the phone means absolutely nothing. Once you get it in writing, keep that piece of paper and refer back to it as needed to make sure they’re living up to the agreement.

Be Willing to Transfer Your Balance

If you tell them you’ll transfer your balance if they don’t help you out, you should be willing to live up to your word. Don’t be afraid to do business with someone else if you don’t get what you want. You can almost always get a better deal when you float your balance to another card at another company. This is where those credit card offers you got in the mail come in handy.

Don’t Give Them Access to Your Bank Account

If you negotiate a plan for paying off the debt, whether it’s a lump sum or a payment plan, NEVER give them access to your bank account! This is a recipe for disaster!

Some collection companies will monitor that account and make a huge withdrawal at the worst possible time. Some will “accidentally” take out more than you agreed to. Getting that straightened out and getting your money back will be an exercise in futility. Avoid giving them access at all costs!

As you pay off each debt, call the credit card company and close the account. This may be a long phone call, but it’s worth it to have the credit cards out of your life. They will do everything they can to keep you as a customer, offering incentives and other goodies. You will probably spend 30 minutes or more on the phone and end up talking to 2-3 people, but they will eventually close the account once they know you mean business.

Have them send confirmation in writing that the account is paid in full and closed. Keep that document forever so they can’t contact you later saying you owe more money on that account.

You May Have to Pay Taxes on any Forgiven Debt

Anytime a debt is forgiven, anything over $600 must be reported by the creditor to the IRS. According to tax laws, debt forgiven is classified as income so you will have to pay taxes on that at tax time. Be sure to take that into consideration whenever you’re negotiating your debt. There will be consequences on April 15.

I believe the best thing you can do with any credit card is to cut it up and never use it again. They are just not necessary. Just because everybody tells you you need one doesn’t make it true.

Angie and I haven’t had a credit card in over 10 years and I can tell you from personal experience it’s one of the best financial decisions we every made!

So if you want to do better financially and eventually get out of debt, it starts with taking action. It starts with thinking and doing things differently than all the other broke people out there. Negotiating your credit card debt is just one tool you can use to start the process.

Question: Have you ever successfully negotiated a debt? How easy/hard was it? Leave a comment on our Facebook page or below and tell me about your experience!