How to Settle Credit Card Balances

Job loss, health problems and other issues can contribute to out of control credit card balances. Consumers struggling to pay off these debts may be wondering about options. Credit card settlements allow consumers to make a single payment to settle the debt obligation. This payment is usually much lower than the original balance (pennies on the dollar). Creating a plan for negotiating credit card obligations can assist in getting debt settled.

Instructions

1

Figure out what you can afford. Before contacting the creditor, it's important to know how much you can pay. Take inventory of savings and other assets that could be allocated toward debt. If you don't have assets, determine how much you can save each month to settle. For example, cutting out a daily latte could add up to $100 or more each month.

2

Contact the creditor. Based on what you can afford, make an offer. This is typically 25 percent of the original debt. For example, if you owe $10,000, you might offer $2,500 to settle the debt. When negotiating, start out with a low offer. It might get refused but the creditor will make a counter offer. Starting out low will provide more room to negotiate.

3

Get it in writing. Request written confirmation of the agreement. Review the agreement to ensure the terms of payment are correct. The agreement should include the total payoff amount and say the payment satisfies the entire debt.

4

Check your credit report. A credit report can be ordered through AnnualCreditReport.com. The debt obligation should be marked as settled (which will improve your credit score). File a dispute form with the credit bureau (with a copy of settlement papers) if the account shows as outstanding.