Credit Card Debt Settlement

Credit card debt settlement is one solution for credit card debt relief. This is an option to consider only if you’re already behind on your payments since it will hurt your credit. In fact, some financial experts claim it can be almost as damaging as bankruptcy. So if you have other options available, try them first.

Despite this, credit card debt settlement has become very popular. You may have heard stories or even know someone who has cut their credit card balances in half. However, this is the exception not the rule.

Credit Card Debt Settlement

There are so many people trying to settle with the credit card companies, you will have to really stand out get their attention. And you must have a good reason to ask for it. Loss of employment, divorce or unexpected medical bills could warrant debt settlement. Irresponsible spending on the other hand would not.

If you’re fortunate enough to have some of your debt forgiven, be thankful because credit card debt settlement is a one-time solution. If you got in your situation because of undisciplined spending habits, you can check out the section on budgeting or you may need to seek the advice of a nonprofit credit counseling organization to get your finances under control. You can check with the National Foundation for Credit Counseling to find a counselor in your area.

One of the first questions you may ask is, "Should I use a credit card debt settlement company or do it myself?" The answer – do it yourself.

There are several reasons why I say this. The first being these companies are not all legitimate. Most, if not all will ask for at least some money upfront. If they go out of business or are shady, you’ve just lost your money and are still in debt with the credit card companies.

The second reason to go it alone is these companies are expensive. If you had extra money lying around, you wouldn’t need their help. You may actually end up in more debt even if they’re successful settling your credit card accounts because of the high fees they charge.

If you’ve considered these reasons and still feel that you need help dealing with credit card debt settlement, do careful research to make sure the company you choose has a good reputation. You can find reputable companies by going to the American Fair Credit Council website. This is a non-profit organization that only works with companies who agree to abide by their strict code of conduct.

The way credit card debt settlement works and how well it can work for you will depend entirely on your circumstances. Again, credit card companies will usually not even discuss settling unless you're significantly delinquent.

Even then, there’s no guarantee they will work with you to settle for the amount you want. However there are steps you can take that will make the process easier for all involved and possibly increase your chances of success.

  • Prepare before you make the call. You can do this by gathering your most recent statement and any settlement letters you may have received from the company.

    You should also determine how much you would be able to pay and when you could pay it should you reach a settlement. Most companies will require a lump sum payment, especially if they reduce a large portion of the balance. Take your time and get this one right. The last thing you want to do is make a promise to pay a certain amount by a certain time and fail to deliver.

    If someone other than yourself is the primary cardholder (such as a spouse), you will need to have that person available to give permission for the credit card company to discuss the account with you.

    You should also familiarize yourself with your rights as a consumer. You can find these rights on The Federal Trade Commission website.

  • Make the call from a quiet place that is free of distractions since you will need to give your undivided attention. The company will verify your personal information. After that, let them know you are interested in settling. Be aware that most calls are monitored and recorded so be mindful of what you say and how you say it. Being rude or irate will lower your chances of settling to zero.

    If you’re unable to reach an agreement, ask for a supervisor or department manager. These people will have more authority to negotiate and more experience, too. Ask to have late fees, finance charges and over the limit fees removed. These will likely total between 25% - 40% of the balance.

    If they are unwilling to settle for at least 25%, thank them for their time and decline to make an arrangement. More often than not, they will offer a settlement within a few weeks. The farther behind you are, the more anxious they will be to make a deal.

    At this point, your credit score has already suffered and waiting a few more weeks won’t likely make things that much worse. It can however, save you a lot of money if they do agree to settle.

  • Always keep a record of who you spoke with, the date, the time and the arrangements made. Also ask the company to send a copy of the agreement in writing outlining all the details. Make sure it’s exactly what you discussed. Don’t send any money until you have this agreement in writing. Nothing is more frustrating than to pay a large amount just to find out the company has no record of your deal.
  • Once the deal is reached and you have the agreement in writing, pay the amount you agreed to in a timely manner. Then immediately start working to re-build your credit. Even though the item will remain on your credit report for seven to ten years, the most recent activity counts the most so make sure it’s positive.

Credit card debt settlement can work in certain situations. However, it should only be used after you’ve made every attempt to pay your credit cards and still can’t. Learn other options along with proven ways to tackle your debt.

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