If you have been following the early tips I suggest for how to negotiate and settle directly with your credit card bank, you have already had several “just calling to keep you posted” conversations with your bank (I recommend you call your lender once a month, or every several weeks, up to month 5 of being late with payments). If you are late to the process, and are already between 150 and 180 days late on your credit card, the following debt negotiation tips still apply, but be sure to hit the quick review links below.
Before I get into how you can go about targeting the amounts you are most likely to settle at with each of your creditors during negotiations, I want to make something abundantly clear.
Settle your credit card 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 does not 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 on line: 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.
Negotiating the amount you can afford to pay. How much will your bank 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.
2 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.
- Work with one of the professionals I highlight here who can help you negotiate your own debt
What phone number do you call to settle your credit card?
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 to three of missing a payment, your calls may be handled by a customer service department. After 90 days of not payment calls are often routed to, or made by, a department that handles recovery. Your banks 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).
- Depending 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.
If you have not yet read through the previous article in this section, read more about your bank turned bill collector. That article will help 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 been making your calls monthly 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 XXXX.XX. 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 are calling in to negotiate and are between 150 and 180 delinquent, you will 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 be NOT be verbalized as percentages, but as round dollar figures that are short of, or really close to, what that bank is known to approve and accept.
Be prepared to answer questions about your income and budget and other debts during the settlement call.
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 what 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.”
“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. 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 directly with.
- 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.
Credit card debt negotiation with your bank review.
You want to identify the types of accounts that are considered best targets for negotiating a balance reduction, and which are better left out of your debt settlement plan.
You should also recognize that settling debt can be viewed as being in a race. Your access to money over a short, or longer period of time, will dictate whether you are a debt settlement sprinter, or if you are more of a distance runner.
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 collections.
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 places 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 section of the debt relief program will be dedicated to how to settle with a debt collection agency hired by your credit card lender, and the second stage of collection.
If you would like to review the way I rank the top 7 credit card lenders based on their historical and current trends of working directly with their customers, check out how these banks rate when helping customers resolve debts, and some realistic settlement percentages you can start your planning with.
Continue on with the Debt Relief Program – Settling debt in second stage collection (coming soon).