How to Negotiate Your Credit Card Debt if the Minimum Payments Are Too High

A man and woman play go fish with credit cards
Tina Russell/The Penny Hoarder

Picture this: You’re scrolling through your browser admiring all the cool things you can’t afford.

You stop at the robotic vacuum and think, “If only I didn’t have to vacuum this 400-square-foot apartment, I could do so many more things.”

You see the store is running a promotion for its credit card: zero percent interest and no annual fee for the first year.

You know you need to build credit, and while you already have a vacuum, a robotic one will save you at least 15 minutes per month.

Heck, you could get a cat. That has fur! So you sign up, get approved and get a fluffy cat. A few days later, that card is in your mailbox.

Fast forward 10 years.

You find your trusty vacuum in a box you haven’t opened in several moves. Instead of reminding you of good times and free things, it reminds you that you still have a balance on that credit card and that you’re allergic to cats.

In fact, you moved across the country for love three years ago and asked the card company to increase your credit limit. And it did!

You’ve got an underpaying job, and the only thing you got from that cross-country move was a bad breakup and more credit card debt thanks to that increased limit.

The point is: No one dives into credit card debt on purpose. It creeps up over time in the form of a just-this-once and an I’ll-make-up-for-it.

If you have nothing left to sell and no time for a side hustle, and you don’t qualify for loan consolidation or a balance transfer card, there’s still hope.

3 Tips For Negotiating Credit Card Debt

Before you pick up the phone or write your harshly worded email, take these tips with you:

  • Get everything in writing. Take notes and record calls (with permission). Any time the person on the other end of the line agrees to something, have them send it to you via email and snail mail.
  • Do your homework. Research whether any complaints have been filed against your creditor and at what percentage of the outstanding balance they’ve historically settled debts for. You can find this information on debt forums in places like Reddit.
  • Be kind but assertive. In any negotiation, you’re more likely to get what you want if you’re nice to the other person. But that doesn’t mean you should be a pushover. Stand firm in what you want, and don’t be afraid of the word “no.”

How to Negotiate Credit Card Debt

Negotiating your credit card debt can be a long and difficult process, but if you’re at the end of your rope, here’s how you can lessen your debt burden and regain your financial stability.

1. Find Out How Much You Owe

First, you need to pull your credit report and see your credit score from at least one of the three credit bureaus.

Your credit report will include all of your credit accounts, all credit inquiries from the last two years, any debt in collections, and public records such as bankruptcies.

Then you can list all your creditors, interest rates and credit card balances to see a clear picture of your debt. This will also help you determine if you have any debt you’re not legally obligated to pay.

Depending on your state, after anywhere from three to 10 years of no payments or activity, credit card debt is considered past the statute of limitations, meaning you can’t be sued for it.

But certain creditors may keep harassing you to paying on it again. This type of debt is called “zombie debt,” because if you make a payment on it, it restarts the statute of limitations and you’re required to pay it again.

Debt collectors will sometimes make calls or send debt settlement letters in the mail to get you to make a payment in an attempt to restart the statute of limitation. Always consult your credit report before agreeing to anything.

2. Know Your Options

Now that you know how much you owe and whom you owe it to, you need to figure out what you can negotiate for.

And you don’t have to wait until your credit is in the dumps to start negotiating. Mae Areewan was able to negotiate a settlement before her debt was sold to collectors, about two to three months after she stopped paying on it.

“They offered me 50% reduction from the debt amount I had, and I settled it immediately,” Areewan said.

Here are some things you can ask for when you negotiate directly with the credit card company:

  • Moving your monthly payment date. If the timing of your due date impacts your ability to make the payment, you can ask to move it.
  • Forbearance or hardship plan. If your situation is only temporary, your card issuer can allow you to skip a few monthly payments without late fees until you’re back on your feet.
  • Erase late fees. In something called a workout arrangement, the card issuer can eliminate late fees and/or lower your interest rate. If your issue is more long term, this can be a good option.

If your debt is already in collections, or if none of those options work for you and you need some professional help, here are some options for debt settlement. Debt settlement is the process of negotiating with your creditors to ultimately pay less than what you owe.

  • Lump-sum settlement. Agreeing on a settlement amount that you’ll pay upfront in full will get you the best deal when you negotiate with a creditor.  
  • Payment agreement. You may also be able to arrange a payment plan with your creditor. You can still settle for a lower amount, but you will pay more than you would in a lump sum.
  • Debt management program. These plans, offered by strictly regulated nonprofit credit counseling agencies, help you pay off your credit card debt in three to five years while you rebuild your credit. A credit counselor will help you make a budget, get a lower interest rate and fees, and eliminate finance charges on your debts.
  • Debt settlement company. This differs from a debt management program in that you hire a company to negotiate debt on your behalf. You’ll pay them monthly, but they’ll withhold payments on your debts until you’ve built up enough for them to settle a debt, meaning you’ll continue to get calls from collectors and your credit score will plummet.

As a last resort, you can declare bankruptcy. If you’ve tried these options but still can’t pay your bills and don’t see that changing anytime soon, bankruptcy might be worth the long-term negative effects on your credit.

If that’s the route you want to take, consult a bankruptcy attorney to determine what type of bankruptcy is right for you and what you should do to prepare.

3. Find the Right Person to Negotiate With

When you call the credit card company or collections agency, the first person who picks up the phone may not be able to help you — even if they think they can.

You’ll need to be connected to the representative who handles settlements specifically. You can ask for a credit manager or simply someone authorized to make a settlement deal. Companies may call their settlement options and departments different things. Some names include:

  • Settlement arrangement.
  • Workout arrangement.
  • In-house help program.
  • Workout program.
  • Loss mitigation.

If you’re in collections, your debt collector is probably already calling you. They’ll probably have corresponded by mail, so the information should be in the letter.

And don’t let anyone tell you you can’t speak to whomever you want. Raeshal Solomon was able to negotiate and pay off $350,000 of car, medical and other debt over five years by being assertive. Many times, she paid pennies on the dollar just by sticking to her guns and asking for a manager.

“Don’t let anyone bully you into terms you can’t afford,” Solomon said.

4. Call Each Company

Once you’re connected to the right person, get their name and ID number, and be diligent about documenting every conversation. And if they agree to something, have them email it to you before you get off the phone.

When you’re talking to creditors, it’s important to first know your rights. Creditors can’t:

  • Curse at you.
  • Threaten violence or jail time.
  • Call you before 8 a.m. or after 9 p.m.
  • Call you at work if your employer prohibits it.
  • Call your friends, except to verify your address and phone number.

Don’t let them pressure you into a payment you can’t afford or that will go toward debts past the statute of limitations.

It’s also good to have an idea of what you can realistically settle for. If your debt is recent and still in internal collections at the credit card company, you may have to settle for is negotiating a lower interest rate.

Every time your debt is sold to another company, it gets bought at a lower price. So the more times your debt has been sold, the lower you can negotiate.

If you need to work out a payment arrangement, you’re not going to be able to negotiate as low as if you offer to pay in full. If you can afford a lump-sum payment, start by offering 30% or less of what you owe, but expect to end up paying 40% to 65%.

Debt collectors work on commission, so they’re motivated to make a deal. Negotiate just like you would for a car or salary. Never take the first offer.

Mention that if you can’t settle, you may consider bankruptcy — or use the power of silence to let them negotiate with themself.

5. Call Again, and Again, and Again… and Wait

One does not simply settle their credit card debt in a single phone call.

This process will take several months, include several representatives and end when you have something in writing either stating your debt is paid off or detailing your payment plan.

If the process takes longer than six months, your debt may even be sold to another creditor, with whom you’ll start the process all over again.

If you’re settling with a payment plan, send a registered letter outlining the payment schedule in detail. Never give a debt collector access to your checking account through electronic withdrawals or by paying with checks. Money orders are the safest way to pay your settlement.

When the debt is paid, request that the account be reported as “paid as agreed upon” rather than “settled.” You can also ask that they remove any tradelines associated with the account from your credit report. They may refuse, but it’s definitely worth negotiating for — especially if you’re willing to give them a lump sum.

Pros of Debt Settlement

The biggest advantage of debt settlement is that you don’t have to pay the full amount you owe. You might be able to become completely debt-free as a result and start thinking of your future, instead of constantly being reminded of your past.

Settling is hard, but if you’re in a situation where you can’t afford the full amount of your debt, it’s worth the work.

Cons of Debt Settlement

If you go the credit card debt settlement route, you can expect long-term effects on your credit score. And you should prepare to pay taxes on the amount forgiven.

You may want to put all the negotiating off on a debt settlement company. While this sounds like an easy out, you’ll pay for it. The company will stop making payments on all your debts, lowering your credit score even more and increasing the number of creditors calling you every day.

Then at the end, you’ll be paying them a fee of 20-25% of the settlement amount.

So before you try to duck out of your debt, check out debt consolidation loans, balance transfer credit cards or a debt management program offered through a credit counseling agency. They’re better for your credit, save you a lot of time and are easier to manage.

Jen Smith is a staff writer at The Penny Hoarder. She and her husband paid off $78,000 of debt in less than two years on two less-than-average salaries. She gives money-saving and debt-payoff tips on Instagram at @modernfrugality.