Use This Script to Negotiate Your Credit Card Debt Yourself—For Free

Photo to accompany story about how to negotiate credit card debt. Getty Images

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You can negotiate with your credit card company to reduce – or even erase – your debt. 

Just use the scripts below. 

There’s no better time than now to try. Because of the coronavirus outbreak, several credit card companies are offering temporary relief for customers, including pausing payments, reducing or forgiving late fees, and pausing interest charges. In some (rare) cases, parts of credit card balances are being forgiven entirely. 

“Right now in the middle of COVID-19, card issuers are more willing to work with people, because they would rather work with you than you default on your debt,” says Michelle Black, a credit card expert and personal finance writer. 

There are two ways you can go about it: you can pay a company to talk to your creditor on your behalf, or you can negotiate yourself for free.

In either case, if you’re struggling with credit card debt, reach out to your card issuer immediately to discuss your options and possibly negotiate it down. It’s important to act fast so you don’t fall any further into debt. 

When you pay any bill late (past 30 days), the creditor can report the delinquency to the three major credit reporting bureaus and you can see a dramatic dip in your credit score. A series of late payments can create bigger credit problems down the road. Avoiding this debt spiral is crucial.

Here are tips on where to start, how to prep, and what you can expect.

Negotiating Credit Card Debt: Do It Yourself vs. Hiring Help 

Try and negotiate with your credit card company yourself first. You’ll need to go in armed with as much information as possible on your financial situation, including your current balance, credit history, and financial goals.

“It depends on what you’re negotiating,” says Black. ”For example, negotiating a lower APR is usually not too hard.” APR is the annualized interest rate plus loan fees.

You also could work with a credit counselor or debt settlement company, or consider bankruptcy, although the latter is a last-ditch resort to be considered only by people in deep debt. A bankruptcy stays on your credit report for up to a decade, and will affect your ability to get credit during that period. 

Pro Tip

There’s no better time to negotiate credit card debt than now, if you are struggling. Because of COVID-19 and the current economic climate, several credit card companies are more lenient about missed payments, late fees, and interest charges. If you’re willing to negotiate yourself rather than hire a third party, you’ll save money.

While negotiating yourself is the cheapest option, it may be in your best interest to get help if you have too much debt or can’t work out a repayment plan with your creditors on your own. Set up an initial consultation with a credit counselor rather than choose a debt settlement company or file for bankruptcy, suggests Nikki Dunn, a certified financial planner and founder of She Talks Finance.

A debt management program through a credit counseling agency can help you consolidate your debts and lower your interest rates at a small cost, whereas debt settlement companies are known to engage in deceptive and unfair practices — and could cost thousands of dollars. 

That’s why it’s important to do your homework before you enroll in a debt payoff program. Look for nonprofits that are accredited by groups such as the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). 

“A good question to ask any credit counseling agency or debt settlement company you’re thinking about working with is: ‘What can you offer me that I can’t do myself?,’” Dunn says.

Whether you choose to negotiate yourself or work with a professional, be sure to give your finances a thorough look first, so you can carefully weigh your options.

Types of Credit Card Debt Settlements

Credit card companies are typically willing to negotiate in order to maintain a lifelong relationship with you as a customer, whether it’s lowering your interest rate or forgiving some of your unpaid debt.

“To start the process off, just focus on getting your interest rate lower because that’s really the doozy,” Dunn says. “Start there then move on to the next part of the process, which is negotiating settlements.”

A settlement is an agreement between you and your card issuer to settle for less than the full amount owed on your credit card. 

The best one for you will depend on your financial situation. “Account for what money you can get access to and what offers you can actually make,” Dunn says.

Here’s a quick overview of three types of settlements that card issuers are likely to agree to: 

Lump-sum Settlement

If you have room in your budget to offer one big payment, Black and Dunn recommend using the lump sum technique. This type of settlement could save you the most money in the long run. 

For example, you could ask for a lump sum payment of $2,000 to settle a $3,000 credit card bill. If the card issuer agrees to your offer, the remaining balance is forgiven.

But there are two downsides to lump-sum settlements: taxes and possibly a hit to your credit score. Depending on how the payment is reported to the credit bureaus, the account could show on your credit report as settled for less than the full balance. This could negatively affect your credit score. Additionally, any forgiven debt is often taxable as income. Taking the previous example into account, a person with $3,000 in credit card debt who negotiates to pay only $2,000 of the balance would have to report the remaining $1,000 as “other income” to the Internal Revenue Service for that year. 

Workout Agreement

With this type of agreement, the card issuer is willing to work with you to make it easier to manage your credit card debt.

The issuer may reduce your minimum payment or interest rate on a card or multiple cards, and potentially waive past late fees on your account. You can also ask for an alternative repayment schedule. 

But your card issuer may choose to close your account with a workout or lump-sum agreement. That could cause your credit utilization ratio to go up. This ratio — how much debt you carry in relation to available credit — makes up 30% of your credit score, and if it increases, your credit score could drop.

Hardship Plan

A hardship plan could be a good option, if for example, you were to suddenly lose your job or have a medical emergency. This type of agreement is also known as a forbearance program.

Many credit card companies are giving people a break because of the coronavirus pandemic. With this agreement, your card issuer may pause or lower your interest rate and put a halt on late fees, as well as agree to let you skip payments. But a hardship plan is different from forgiveness of any debt. It’s a temporary solution until you’re back on your feet. You will still pay back anything you borrowed during the forbearance period, and possibly more because of accruing interest. 

“If you think your financial hardship is temporary, then a hardship agreement may be a better option than doing a lump sum settlement,” Dunn says. “That way, you’re planning on eventually paying the debt off and avoiding anything negative on your credit from a settlement.”

How to Negotiate Credit Card Debt in Seven Steps

Negotiating credit card debt can be an extensive process. It can go a lot smoother if you prepare ahead of time. Start with the following steps:

  1. Figure out how much you owe: Before you can negotiate, you need to be aware of your current interest rate and balance on the card. This information is usually available on your card statement or online account, but you can also call the card issuer.
  2. Consider your options: Decide whether a lump-sum settlement, workout agreement, or hardship agreement is best for your situation. Dunn suggests getting really clear on how much you’d be willing to settle for. 
  3. Use a script to outline your terms: Create a rough outline of the terms you want (type of settlement, payment amount, interest rate, etc.) and use a script to ensure you hit all the right points.
  4. Contact your credit card issuer: Once you’ve gathered the information you need to negotiate, it’s time to make the call. Ask for someone who has the authority to approve your request, explain your situation, and make an offer.  If you’re not pleased with the terms being offered, don’t hesitate to ask for a supervisor. You can also opt to call back another time over the coming days to speak to someone else if you feel like you’re not making progress. As long as you’re polite, persistence in this type of situation can make a big difference. 
  5. Take detailed notes during your conversation: While you’re on the phone, type out or write down everything that’s discussed, so you can refer back to it in the future.
  6. Get a written copy of your agreement: Before you decide to move forward, it’s important to understand what you’re agreeing to. Make sure to get a copy of the terms in writing from your card issuer.
  7. Check your credit report regularly: You can now check your credit report weekly for free until April 2021 with the three major credit reporting agencies: Experian, TransUnion, and Equifax. If you’re meeting the terms of your agreement, the issuer must report to the agencies that you are “current” on the account. But sometimes, banks inaccurately report to the credit bureaus. If you come across any errors or inaccuracies, make sure to refer back to the agreement so you can dispute it. The card issuer isn’t required to report that you’re current if you were already behind on your payments at the time of the agreement.

What Exactly Should You Say to Your Credit Card Company?

If the thought of negotiation with your credit card company is intimidating, don’t worry — there are scripts you can use for reference. If you know what to say ahead of time, you’re more likely to be persuasive and come to an agreement.

Ask a customer service representative to connect you to the department that oversees debt settlement or hardship. 

If you want a lower interest rate, Dunn suggests saying something along the lines of the example below.

Hello, my name is ____ and my account number is _____. I’ve been reviewing my finances and I have come across some other companies offering lower interest rates (or a 0% balance transfer offer). I’ve been a loyal customer, so I wanted to reach out to you first to see if you can help reduce my interest rate.

NOTE: You could also utilize a financial hardship typescript with an interest rate reduction (“I’ve come upon hard times financially and a rate reduction would really help right now and prevent my situation from becoming worse”).

If you want to settle your debt, Dunn recommends saying the following:

Hello, my name is ____ and I have run into significant financial troubles at this time and have fallen behind on my payments owed to you. My account number is ____. It has become impossible for me to manage all of my bills due to (lost job, death in family, medical issues, etc). I’d like to bring my account current, and I am trying really hard to avoid bankruptcy. I have other creditors as well that I have to make similar arrangements with to avoid having to go bankrupt. I only have so much cash available to do this, though. I can afford to pay (state the amount-around 30% of balance to start) by (date). Once I’ve successfully repaid this debt, I’d like an agreement that any negative information given to the credit bureaus be removed from my credit report and the account be settled as “paid as agreed upon”. Thank you (creditor/collector’s name), for understanding and working with me on this. I will make ($ amount of payment) payments beginning (date of payment). I would like to get our agreement in writing from you, then I will be happy to send payment.

It’s important to be patient, persistent, and careful when you decide to negotiate, Black says. Each creditor is different, so don’t let one poor experience discourage you from negotiating. If your credit card company isn’t willing to work with you, it may be time to get help from an outside source like a credit counseling agency. 

“Be proactive and talk to your card issuers before there’s a problem, because they realize people are going through difficult times and they’re more willing to offer you solutions than they maybe have been in the past,” Black says.