How to Negotiate Credit Card Debt

By Michelle Lambright Black
Reviewed by: Lauren Bringle, AFC®
Published on: 10/11/2021

From global pandemics to money mistakes, many different forces can hurt your personal finances. For example, suppose you find yourself struggling to keep up with your monthly payments. In that case, you might wonder whether negotiating your credit card debt could provide some much-needed relief.

There are many reasons an individual falls into credit card debt (see how yours compares to the average American credit card debt). Credit card debt settlement is a potential solution for people who are behind on their credit card bills. The process typically involves negotiating an agreement with your credit card issuer to pay a reduced settlement amount in a lump sum if you don't know quickly.

Yet, despite the savings potential, credit card debt settlement can have several drawbacks. If you consider this approach to solve your debt problem, you should understand how the process works. It's critical to look over both the pros and the cons before you make your decision.

Is it possible to negotiate credit card debt?

Debt settlement isn’t the right choice for everyone looking for alternatives to how to pay off credit card debt. Your best bet is to figure out a way to manage your credit card debt before it gets out of hand.

However, if you’re more than three months behind on your payments or if your debt collector is calling, it may be time for more drastic measures. At this point, you might want to look into how to negotiate credit card debt.

Negotiating with creditors typically works best with unsecured debts. Some common examples of unsecured debts are credit cards, personal loans, and private student loans.

Other kinds of debt, like a mortgage or an auto loan, are secured by something tangible. For example, you secure a mortgage with your house and an auto loan with your vehicle.

If you default on a secured debt or loan, your creditor can work through the legal process to take ownership of the collateral you agreed to provide. So because of lenders' options with secured debts, a settlement on these accounts might not be as easy to negotiate.

However, with unsecured debt, there’s no collateral for the lender to seize in the event of a default. Sure, a creditor can take you to court, but there’s no guarantee a judge will rule in its favor. As a result, it may be in the creditor’s interest to collect something from you in the form of a settlement, even if it’s not the entire amount you owe.

If you want to negotiate a lower payout of your credit card debt, there are a few different ways to proceed. We’ll explore several options below.
You might opt to hire a debt settlement professional to help you. Or you could try to figure out how to negotiate credit card debt on your own. Either way, someone will have to try to negotiate a settlement agreement with either your original credit card issuer or a debt collection agency.

Can I negotiate credit card debt myself?

The short answer to the question above is yes. You can negotiate credit card debt on your own. If your credit card debt has become unmanageable, one option to consider is calling your credit card issuer yourself and discussing settlement options.

There are a few facts to consider before you try to negotiate credit card debt.

  • There’s no guarantee your card issuer will agree to negotiate.
  • Your credit score might decline if you reach a settlement.
  • Saving up a lump sum before you negotiate usually yields the best results.
  • Depending on the approach you choose, it could take years to pay off the debt and restore your credit.

However, if you’re successful in your credit card negotiation attempts, you could potentially save hundreds or even thousands of dollars. This debt settlement letter template may help you if you decide to negotiate credit card debt on your own.

Are there companies that will negotiate for you?

If you do not feel you have the expertise (or the energy) to deal with your creditors, some companies can handle the process for you. For example, credit counseling and professional debt settlement companies can attempt to negotiate with credit card issuers on your behalf. But, understand, such services will come at a price.

  • Debt settlement companies may charge between 15 to 25% of what you owe[1]. (Tip: If you compare reputable debt settlement companies, be sure to ask if their fees are based on the original amount owed or the negotiated figure.)
    A debt settlement company may advise you to stop making payments and put money in an escrow account instead. Once you save up enough money in that account, the debt settlement company will approach your creditor and make an offer. If the creditor accepts, it will usually require a lump-sum payment.
    You might incur many late fees and additional interest as you’re working to build your negotiation funds. This can cause your outstanding balance to increase. Suppose a debt settlement company succeeds in helping you negotiate your debt for less. In that case, you might also have to pay taxes on the amount of your forgiven balance[2].

  • Credit counseling is typically run by a nonprofit organization (though not always)[3]. A credit counseling organization may be able to help by setting up a debt management plan, or DMP, to help you manage your credit card debt.

With a debt management plan, you can often combine several unsecured debts together. Instead of making individual payments to all of your creditors, you make a single monthly payment to the credit counseling program. The program, in turn, distributes payments to your creditors on your behalf.
Aside from consolidating your payments, there’s another benefit to a DMP. Your credit counselor may be able to negotiate lower payments, reduced interest rates, and lower fees. But it typically won’t negotiate a reduction of your principal account balance.

Debt management plans often cost money to join, both in initial setup fees and monthly fees. Costs can vary, but setup fees are sometimes as high as $50, and monthly fees can be up to $75 per month[4]. Depending on the amount of debt you owe, it may take two years or more to complete a DMP. Additionally, you may have to agree not to use or apply for any new credit until you finish your payment plan.

Can a lawyer negotiate credit card debt?

You may feel more comfortable working with an attorney. In that case, a debt settlement lawyer may be able to negotiate credit card debt on your behalf. Debt settlement attorneys will also charge you for the work they do. Those fees might range anywhere from $500 to $5,0005, depending upon the complexity of your particular situation. Some attorneys may charge a percentage of your settlement amounts too.

You can contact the attorney general's office in your state to inquire about competent debt-relief lawyers. The American Bar Association website (or your state bar association) might also be another source to help you find a reputable attorney in your area.

What are the benefits of negotiating credit card debt?

The clearest benefit of negotiating credit card debt is financial in nature. For example, if you owed $10,000 and were able to settle for half, your efforts would yield significant savings. Even if you could only settle for 30% or 25% off your debt, a successful credit card negotiation might still save you a bundle.

Benefits of Negotiating Credit Card Debt

Aside from money saved, other benefits of negotiating credit card debt might include:

  • Credit protection. Being past due or defaulting on credit card debt can have a severe impact on your credit score. If you can negotiate your credit card debt to avoid or put a stop to such problems, you might protect your credit score from further damage.
  • Avoiding bankruptcy. Suppose debt settlement helps you stay afloat with your financial obligations. In that case, you might be able to avoid filing bankruptcy and the credit damage that often comes along with that decision.
  • Peace of mind. Removing the pressure of overwhelming credit card debt may be good for your mental health. Instead of worrying about how you will make your next payment, you rest easier knowing that a plan is in place.

When will credit card companies let you negotiate debt?

Every credit card company sets its own rules about debt negotiation. In general, you need to be three to six months past due on your monthly payments before a credit card company may be willing to entertain the idea of a settlement. Credit card companies typically don't have an incentive to accept a lower settlement when customers are current on their payments.

Keep in mind that your original creditor is under no obligation to enter into negotiations with you. This is true whether you’re pursuing a DIY debt settlement process or you hire someone to work on your behalf, like a credit counselor or an attorney.

But if a collection agency is managing or has bought your credit card debt, you can usually discuss settlement options immediately. By the time an unpaid debt has reached this stage, most collection agencies will be willing to negotiate with you.

What percentage do credit card companies settle for?

When you begin your efforts to settle past-due credit card debt, you may want to consider offering around 40 to 50%[6] of your outstanding balance. But keep in mind that the debt's age, credit, company policies, and other factors can play a role here.

Some creditors might not be willing to settle for anything less than 80%. Others might not accept anything less than the total balance you owe.
Having a settlement fund means you can tell your creditor you have the cash to pay right now if they agree to a debt reduction amount that works with your budget.

If you reach a settlement agreement you can live with, get it in writing. Then, make sure you follow the terms exactly as spelled out.
Be sure to document any payments you send as well. A written agreement and proof of payment can protect you if a creditor or collection agency tries to change its story after the fact. (It’s rare, but it happens.)

If you negotiate your credit card debt, will it hurt your credit score?

The best way to manage your credit card accounts is to pay on time and in full each month. However, when you don’t follow these rules, your credit score can start to suffer from:

A settlement notation on your credit report does have the potential to hurt your credit score. However, since your score already took a hit from late payments and high utilization, the additional damage of a settlement might not be significant. It all depends on your particular situation.

Should I negotiate credit card debt if I’m planning to get a mortgage?

Have you reached the point where you’re contemplating negotiating a settlement on your credit card debt? If so, it might already be difficult to get approved for a mortgage soon.

Any past-due accounts or recent late payments on your credit report have the potential to lower your credit score. And some lenders have additional credit criteria that could require your report to be late-payment-free for 12 months or more.

Credit card settlement or not, it might still be possible to buy a house with bad credit. However, your ability to qualify depends on your specific circumstances.

If you decide to apply for a home without working to improve your credit first, you should be prepared to jump through extra hoops. You may also have to pay higher interest rates than you’d be able to secure with better credit.

Final thoughts on negotiating credit card debt

There are situations where people genuinely can't afford to repay their credit card debt. Since settlement has the potential to save you money, it might be worth considering - especially if you're already several months behind on your credit card bill. And if settlement isn't an option either, you might want to talk to a bankruptcy attorney.

However, if you can find a way to keep your credit card payments current, that approach is probably best. You might be able to rework your personal budget as well and find extra funds to apply toward your debt. Self is a great tool to consider for building back your credit.

If you negotiate a credit card settlement, whether on your own or with help, realize that there will still be work to do afterward. Once you settle a debt, you’ll want to look for credit builder options to help rebuild your credit so you can be in a better credit situation in the future. Options may include a credit builder card, credit builder loan, and more. Contact Self to learn more about rebuilding your credit today.


  1. Forbes. “Debt Settlement: How It Works And Is It Worth The Risks?’. Accessed September 28, 2021

  2. Federal Trade Commission. “Settling Credit Card Debt”. Accessed September 28, 2021

  3. Federal Trade Commission. “Coping with Debt”. Accessed September 28, 2021

  4. Experian. “A Debt Management Plan: Is It Right For You?” Accessed September 28, 2021

  5. Nolo. “How Much Will A Lawyer Charge to Negotiate with My Creditors?” Accessed September 28, 2021

  6. Forbes. “Debt Settlement Negotiations: A Guide to DIY”. Accessed September 28, 2021

About the author

Michelle L. Black is a leading credit expert with over 17 years of experience in the credit industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting and debt eradication. See Michelle on Linkedin and Twitter.

About the reviewer

Lauren Bringle is an Accredited Financial Counselor® with Self Financial – a financial technology company with a mission to help people build credit and savings. See Lauren on Linkedin and Twitter.

Editorial Policy

Our goal at Self is to provide readers with current and unbiased information on credit, financial health, and related topics. This content is based on research and other related articles from trusted sources. All content at Self is written by experienced contributors in the finance industry and reviewed by an accredited person(s).

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Written on October 11, 2021
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