Credit card balances can creep up until you're buried under an avalanche of debt. Making only the minimum payment every month doesn't do much to shovel your way out. If you owe the national average of $14,900 on your credit cards, it will take you almost nine years to pay it off. Get rid of that debt faster by negotiating with your creditors to pay less than what you owe.
Write down the balance of each credit card, the interest and total balance. Determine how much money you have available to pay off the balance. Divide the total balance by what you have available to arrive at a percentage. For example, your credit card debt is $14,900 and you have $8,000 available you can pay 54 percent of the debt.
Add up what you charged for merchandise, products and services. Add up what you paid in interest, late fees, overage fees, penalties and any other bank charges. You may find that for that $14,900 balance less than half of it was for what you charged. This gives you some leverage in negotiating. You may find that your payments covered what you charged. In other words you've paid that money back over the years.
Write down the reasons why you can't pay the credit card in full. And why in the future you won't be able to. Use the fact that you've paid the bank over $xxxx in total payments and that covers what you've charged -- or covers 80 percent for example. Don't lie but do come up with convincing reasons why it's not possible the account will be paid.
Stop paying on the cards and stop using them as well. If you're current on the card, the bank won't be motivated to settle the balance. The bank has received the amount owed every month, so there is no reason to think that won't continue. Save the money and add it to your available settlement amount.
Wait three months before contacting the creditors. Enough time has to pass that the creditor believes that they may not receive any payment from you, much less you'll pay the account in full. Some banks are being aggressive on collections and may contact you when you're only 61 days overdue. Use the contact to set the stage for negotiations.
Contact one of the creditors by phone to inquire about a settlement plan. That first phone call probably won't be productive. The service representative will harangue you to make full payments to catch up. Insist on speaking with a supervisor. Note her name and the date and time you called. Ask for the loss mitigation program, the workout department or the settlement department, if the supervisor isn't negotiating with you. She may not have the authority but won't tell you that.
Offer an amount that is only 20 to 30 percent of your balance. The odds are it won't be accepted but it's low enough you can increase the amount.
Continue calling the creditors one by one until you have contacted all of them. Begin the process again in a few weeks. As you miss more payments the creditors will be more motivated to accept a settlement. When you are approaching 180 days without a payment, the banks will have to charge off the amount. That means it's no longer a collectible account and they can't show it as an asset on their balance sheet. Banks are more willing to settle the closer your account is to charge off.
Call the banks again. Mention that you talked to supervisor X on Y date and you'd like to settle your debt. The bank will probably counter with a much higher settlement amount, perhaps offering to lower the interest rate and eliminate late fees but still demanding the account be paid in full. You might be offered the opportunity to pay that amount over 24 to 36 months. Counter offer with a higher lump sum payment, perhaps 35 percent. Continue the negotiation until you feel the bank will go no lower. Some banks have a reputation for being hard nosed and preferring to pursue full payment through a law suit rather than settling.
Demand that the deal be in writing. Banks sometimes have forgetful memories. Or the person who made the deal leaves the bank, paperwork is lost, and notes aren't made on your account.
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