If you’re behind on credit card payments, you may have heard that card companies will sometimes accept less than you owe. That’s true, but there is no fixed percentage. How much a creditor will accept depends on your situation, the account’s history and who owns the debt.
Why Credit Card Companies Settle at All
Credit card debt is unsecured, so there is no house or car the lender can take back. When an account falls far behind, the creditor has to choose between collecting something now or spending time and money chasing the full amount, with no guarantee of success. For many accounts, a settlement is simply the better business decision.
Typical Settlement Ranges
Settlements vary widely. Many negotiated credit card settlements land somewhere around 30% to 60% of the balance owed, but some are higher and a few are lower. Anyone who promises a specific percentage before reviewing your accounts is guessing.
What Affects How Much They’ll Accept
- How far behind the account is. Creditors are usually more flexible once an account is several months past due or has been charged off.
- Who owns the debt. The original bank and a debt buyer that purchased the account for pennies on the dollar may have very different bottom lines.
- Lump sum vs. payments. A single lump-sum payment often gets a better deal than a settlement paid over several months.
- Your financial hardship. Job loss, medical issues or reduced income can make a creditor more willing to negotiate.
- The creditor’s own policies. Some banks are known for being tougher negotiators than others.
Tips for Negotiating a Settlement
- Know your budget and what you can realistically pay before you call.
- Start lower than your maximum and leave room to negotiate.
- Explain your hardship honestly and briefly.
- Get every agreement in writing before you send any money.
- Keep records of every payment and confirmation.
New to talking with lenders? Read how to talk to your creditors without stress.
What to Know Before You Settle
- Your credit will be affected. Settled accounts are reported differently than accounts paid in full. See how debt settlement affects your credit.
- Forgiven debt may be taxable. Learn about Form 1099-C and canceled debt.
- Watch out for fees and scams. Legitimate companies can’t charge before they settle a debt. Here is how debt settlement fees work.
Let Experienced Negotiators Help
Negotiating with several card companies at once can be overwhelming. Alliance Settlement works with your creditors on your behalf. Get your free debt evaluation.
