When you’re facing financial hardships and can’t repay a debt in full, you can negotiate a credit card balance settlement with the bank or credit card company. You agree to pay a lump sum less than the total amount you owe.
Debt settlements are often used to negotiate a debt reduction, but there are some potential risks many people don’t know about. The process of settling debt can be handled independently, or by a debt settlement company.
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Credit card debt settlement can be an excellent way for individuals and businesses to get out of credit card debt. However, there are also some potential downsides to this type of debt relief.
| Pros | Cons |
| Can drastically reduce the amount of money your business owesWiill have a less negative impact on your credit score.Business credit card debt settlement can help improve your business's credit score in the long run. | Extra fees can be hefty which tend to be equal to a percentage of the settled amountCan appear as a negative mark in your credit rating for seven years.Some forgiven debt can still be taxed. |
A credit card debt settlement do-it-yourself route is feasible for those who are brave enough to attempt the negotiation process on their own. It is true that there are a lot of legitimate debt settlement companies, but there are also a lot of fraudulent ones as well.
Debt settlement companies also charge a percentage of the settled amount as their fee. If you are confident with your negotiation skills, you can always go the DIY route. Here are some credit card settlement advice and steps you should follow.
For Chase customers, you can call the toll-free number 1-800-935-9935 and ask to speak to the collection department if your account is already in collections.
If you are applying for a business credit card debt settlement, be upfront about your business situation and outlook. Discuss why you’re behind with your payments. Avoid being too dramatic or condescending. Be truthful and factual.
It’s helpful if you already have cash saved and you’re prepared to offer a lump sum payment. This will increase your chances of getting a debt settlement approved. Typically, you’d negotiate for half of the amount owed, but the creditor will ask for more.
Be patient with the multiple back and forth and the lengthy negotiation process. It’s essential to keep your cool while being persistent.
When the settlement is approved, get everything in writing. A written agreement will protect you in case the creditor changes terms in the future.
If you have tried various debt relief methods, but nothing worked, and you are worried that your debt will never go away, you may want to consider debt settlement. While this method will harm your credit score, it will give you significant debt relief. In the long run, debt relief will help you get back on track to becoming financially healthy.
If you are having trouble paying your credit card debt, don't be afraid to ask your bank or credit card company about debt settlement options. While you can always seek the help of professional negotiators, the process is easier than you think, and you can always attempt it on your own.
For more articles about debt settlement and wise credit card use, visit Processing Card’s blog.
Florence Carpenter is passionate about ensuring that the process of opening merchant accounts is as straightforward as possible. She graduated from the University of Michigan with a bachelor’s degree in Marketing.
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