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My Citibank Credit Card Has Been in Perfect Standing. Can I Settle the Account? – Matt

“Dear Steve,

31 years old, very good credit (790+), $9,000 in credit card debt – all accounts are current and never have been delinquent.

Hoping you can offer some advice! I have a Citibank credit card account that I’ve had in perfect standing for over 6 years now. A couple of years ago they said they were increasing my interest rate to 15% from the 6.9% interest I had but if I wanted I could close my account and keep my interest rate and pay off the remaining balance at that rate.

So the account was closed and currently has a balance of $5,800. I have never been deliquent on a payment and am currently looking to pay off the balance and be done with the account.

I called Citi and because I’ve never been late on a payment or the account isn’t currently delinquent, there’s no current settlement offer. They did say they would review my account and see if they can offer any type of settlement because I’ve been with them for so long.

In my case, is it even possible to get a settlement from them, and worth it to take a settlement and pay the balance off if the offer is legit? The CS agent said it would not effect my credit and just show up as PAID. But, I’m still wondering will a settlement with Citi have a negative effect on my credit? Right now I have a 790 credit score (just bought a car and ran my credit), so I’m not looking to put a ding on there. if getting a settlement will have any negative effects on my credit, I’ll probably continue to chip away at the entire balance.

Thanks much in advance,

Matt”

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The Answer

Dear Matt,

While I would like to believe the customer service agent, I’m afraid I don’t. Settling debt is a legitimate thing to do in some situations. But one of them is not if you are not willing to take a credit hit.

We can hope Citibank would honor that statement but it is more likely they will report the account more accurately if you settle. In that case they would report the amount that you paid, as PAID, and the amount that was written off as a negative entry. That would be reported on your credit report for up to seven years and will most likely lower you credit score.

If you want to proceed with such a strategy i suggest you get the deal in writing before you agree to pay and specifically ask them to state what they will do with the balance of the debt written off as a bad debt.

If you are not insolvent, meaning your liabilities are less than your total net worth, then you may have to pay income tax on the forgiven debt, just as if you earned it. Citibank will have to report any debt forgiven, more than $600, to the IRS on a form 1099-C.

If things were looking up for you and you don’t have a financial mess looming, if it was me, i wouldn’t settle it. Pay it off in full and continue to keep your credit score rocking.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

My Citibank Credit Card Has Been in Perfect Standing. Can I Settle the Account?   Matt
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • cdc

    I had a similar result today.  I only have one credit card (Citibank) and it has been on auto pay for at least a year or two now at an amount OVER the minimum payment.  I had heard they would lower your interest rate if you asked and I figured maybe they would allow me to settle if I paid it all now.  It’s 29.9 percent now so I figured I had nothing to lose.  They said flat out “no” to reducing the interest rate (after a brief period on hold while I assume they ran my credit).  I then called the number provided for settlement and they told me that as long as the account was current they would not settle.  She suggested I call “the day after it’s late” and something may be available.  It’s just like a mortgage.  The only way to get them to deal with you is to NOT pay them.

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