How to Negotiate Credit Card Repayment of the Principal

While a credit card company is unlikely to reduce your principal amount owed out of the blue, there are certain situations which might make your creditors more likely to negotiate a settlement. However, some drastic steps may have to be taken on your part and you should consider the consequences of your actions, possibly even consulting an attorney, before you proceed.

Instructions

1

Determine how much damage you are willing to accept to your credit report. If you have spotless credit, and you simply want to reduce your credit card balance, the unfortunate truth is that you are unlikely to have much ability to negotiate with your card issuers. As long as your credit is strong, your creditors view this as a high ability to pay them back. Thus, they are not likely to reduce the balance of a debt they feel confident they can collect. However, if you are willing to let your credit score fall, you may gain additional leverage in your negotiations.

2

Fall behind on monthly payments. If you are willing to accept the damage it will do to your credit score, you should fall behind on your payments if you wish to increase your leverage with your creditors. A lowered credit score indicates less of an ability to pay your debts, and credit card issuers are more likely to listen to your negotiation offer if they feel in danger of not receiving any payment at all.

3

Review your creditor's repayment suggestions. If you begin skipping your monthly payments, the credit card companies will begin sending you notices about your past due bills. If you continue to ignore them, the notices may turn into repayment suggestions. Oftentimes, without any prompting at all, card companies may offer you an extended time period to pay off your debt, a reduced interest rate, or possibly even a reduced principal amount. Use these offers as a basis for your future negotiations.

4

Wait until you are at least five months behind on your payments. After six months of receiving no payments, all credit card issuers must write off your debt as noncollectable. Before this happens, your card issuer is likely to listen to your negotiation proposal, as collecting even half of the debt they are owed is better than writing off your debt as worthless. Using any initial offers the company may have made you, counter with your own repayment proposal, and be willing to listen to what the issuer has to say. At this point, it is usually in your best interest to strike some sort of deal with your creditor, rather than having a collection agency pursue your debt. Deals at this point usually involve a reduction in your principal balance to around 50 percent of the outstanding debt in exchange for a lump-sum payment.

5

Consider outside credit counseling companies. Many companies will make grand promises but will tack on exorbitant fees, so if you choose to enlist the help of a credit counseling service, make sure that they are in good standing with the Better Business Bureau and are a non-profit organization, such as the Consumer Credit Counseling Service.