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What are possible outcomes of negotiating credit card debt?

On Behalf of | Dec 30, 2023 | Credit Card Debt

Data from Experian places the average credit card debt of Maryland residents at $6,668, the fifth highest among the 50 states and Washington D.C., so many people in the state know the burdens of high credit card bills. If you are struggling with major credit card balances, you deserve to know what might happen if you try to negotiate with your credit card company.

There are a variety of outcomes that could result. You may work out an arrangement to relieve your debt and achieve a better balance on your card. Still, there is no guarantee your card issuer will want to negotiate. Even if you do reach a debt relief plan, your credit could still suffer harm.

A lump sum settlement

When you negotiate to pay off your card balance in a lump sum, the card issuer will likely accept an amount that is significantly lower than your balance owed. For example, your issuer may agree to accept 50% of the total amount due if you have been delinquent for many months.

This will resolve your debt burden immediately. Still, be aware that your card company will probably close your account when you settle, and credit bureaus will learn of the settlement.

A repayment plan

You can also negotiate a repayment plan or workout agreement to make your monthly payments more affordable. Your card issuer may reduce or waive interest and fees or let you pay a smaller monthly amount over an extended time period. While this allows you to avoid defaulting, your card company might also freeze your card during the repayment plan.

Effects on your credit

The main risk of negotiating credit card debt is harm to your credit score. Settling a debt for less than the full amount will show up on your credit report. Defaulting on your monthly payments also causes significant credit damage.

Even if you successfully complete a repayment plan, the negative marks will remain for seven years. It takes time to rebuild credit, so negotiating credit card debt relief now might limit your access to new credit products down the road.

Negotiating with creditors directly is just one option. Debt relief can also come after filing for bankruptcy, which may offer a more complete solution to your debt problems and minimize your exposure to scam artists. The right approach can resolve your outstanding card amounts and help restore your financial situation.