How to Settle Credit Card Debt

Credit card debt easily gets out of control because of the high interest rates and fees that are charged for various reasons. If you find yourself in over your head, however, you may be able to settle the debt. How to settle credit card debt is not complicated and is a fairly easy process. Typically, by contacting the company and explaining your situation, you may be able to drastically reduce and settle the debt.

Make an Offer to the Company

You should begin the settlement process by contacting the creditor. This may be the original credit card company or a collection agency. You will be able to verify the full amount of the debt to determine where to start the negotiation process. Because credit card debt is unsecured, the reduction rate is greater compared to other types of debt settlement. Your opening offer should be between 10 and 25 percent of the full debt. The older the debt is, the greater the reduction you can expect. Generally, a lump sum payment is preferred for debt settlement; however, you may also be able to work out a payment arrangement. With a payment arrangement, on the other hand, you will more than likely have to repay more of the debt than with a lump sum payment. The more reason the company has to believe you will not be able to pay the debt in full, the more incentive they have to settle with you.

Get Everything in Writing

When you are negotiating credit card debt settlement, be sure to get the agreement in writing. You need to be certain to have, in writing, that the payment is a full and final settlement of the debt. You do not want to send the company a payment, only to have them apply it to the overall debt and still seek payment for the amount that remains. You will need this agreement to send to the credit bureaus with proof of payment to have the debt notated correctly on your credit reports, in case the creditor does not send the proper notification.

When to Talk to a Lawyer

To make the settlement process less stressful and potentially more successful, you should consider hiring an attorney to negotiate on your behalf. Creditors tend to take attorneys more seriously than the general public and may be willing to allow more latitude in their settlements.