How to Settle Your Credit Card Debt for Less

If your credit card balance has a stranglehold on you, this may be a good time to call your credit card company to see if they are willing to negotiate. It is possible that you may be able to settle your credit card debt and save money. With the unemployment rate at 9.8% and a high credit card default rate; many companies are scrambling to try to collect as much outstanding debt owed them as possible.

Try to Negotiate a Lower Interest Rate

Credit card companies are racing to raise interest rates before a new law freezing rates takes effect. Higher interest rates make it difficult to pay down your principal and get out of debt, especially if you are only making minimum payments. Contact your credit card company to see if they are willing to lower your interest rate; let them know that you are shopping around for a lower rate. If you can show that you have been a good customer and always paid your balance on time in the past, they may be willing to lower your rate rather than lose you as a customer.

Transfer Your Balance to a Lower Interest Credit Card

There are still some credit card companies offering a 0% introductory interest rate. Take advantage of the offer and try to pay off as much of the principal as you can while you have the lower interest rate. If you have other cards with lower interest rates, consider transferring all of your balances to the lower rate credit card.

Try to Negotiate the Amount You Owe

In the past, negotiating a lower balance would have been impossible. Credit card companies write off a six-month past due account as a loss, so they are more willing to negotiate in hopes of recouping at least a portion of that balance. If your account is 30 days or more past due, many companies may be willing to accept 60%-70% of the outstanding debt. It is important to note that negotiating a lower balance will negatively affect your credit score, but at least you will be free of the debt. In addition, you may have to pay taxes on the amount that is forgiven.

Keep in mind that your first attempt to negotiate may not be successful, but don’t be afraid to try a second time. Many credit card companies have had the advantage of receiving bailout money from the government giving them a little more breathing room to negotiate with you. The hit that your credit score will take should not deter you from settling your outstanding credit card debt in order to save yourself years of headaches and heartaches that unpaid debt will bring.