Learn How to Settle Credit Card Debt
- 3 min read
- If you are behind or struggling to meet your minimum monthly payments, then credit card settlement is a good option.
- Stop payments and save money for the settlement.
- Decide if you want to negotiate by yourself or use a professional debt settlement company.
Making Your Move to Settle Credit Card Debt
You can settle your credit card debt! Taking the first step is difficult. It means that you have to deal with your financial situation including: changing your spending habits, looking for new sources of income, dealing with a lower credit score, and collection calls.
To settle credit card debt you have to be aware of your financial situation, including your debts, assets, and income. Credit card settlement is just one method of debt relief. In general, you have to show some type of hardship or inability to pay, otherwise your creditor will pursue the debt through a court judgment, which can lead to wage garnishments, bank levies, and liens on your personal property.
Debt Coach: If you are not sure what type of debt relief is most appropriate to your situation then use the Bills.com Debt Coach. The Debt Coach helps you look at your financial situation and goals and then recommends one of five proven debt relief solutions.
If your credit score has already been hurt (or is falling) then credit card debt settlement is an option to consider. Many times, the first steps are the most difficult. Dealing with creditors is stressful, especially since the debt collection industry is filled with many shady characters. By taking the following steps, you can settle credit card debt :
- Step 1: Count your pieces - take stock of your debt
- Step 2: Know your moves - negotiating tactics
- Step 3: Make the move - DIY or Professional Debt Settlement
Step 1: Count your Pieces - Take stock of your debt
1. Chart out your debt:
|Name of Institution||Amount Owe||Minimum Payment|
2. Figure out how much you can afford to pay each month. If you can only meet the minimum monthly payments, paying off your debt will take a very long time.
3. Count your assets: Protect your assets against collection activities. You will need to put aside money for your settlements.
Step 2: Know your moves - Negotiating the Board
In order to reach a successful credit card settlement you need to convince your creditors that you cannot afford to pay back the debt. Here are some preliminary steps to take:
- Save money for the settlement.
- Prepare yourself for an extended negotiation process.
- For more information and tips read the Bills.com article about debt negotiation and settlement
- Decide if you can do the negotiation by yourself or if you need professional help.
Step 3: Make the move - DIY or Professional Debt Settlement
You can settle credit card debt by yourself or through a professional debt settlement company. You have probably read articles that tell you that you can do it yourself, and hiring someone is a waste of money. Other articles tell you that only a credit card settlement company can get the job done. There is no one right answer. Sometimes an amateur, albeit with strong skills, can get the job done.
DIY: If you have a good grip of your financial situation, can control your budget, understand the debt collection process (statute of limitations, collection agency rights) and know how to negotiate a settlement, then DIY is a viable alternative.
Professional Debt Settlement Company: If you are stressed over dealing with your debt, have trouble analyzing your financial situation and setting up a plan, then hiring a professional debt settlement company is a good choice. However, be careful when choosing your debt settlement company. Choose a reliable firm, that is accredited, preferably a member of the American Fair Credit Council. Your funds are kept in a FDIC insured account, under your name and control. A reputable firm takes its fees only upon completion of a successful settlement.
Contact one of Bills.com's pre-screened debt providers for a free, no-hassle debt relief quote.
Did you know?
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Auto loan debt was $1.55 trillion and credit card was $0.99 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in Montana, 20% have any kind of debt in collections and the median debt in collections is $1589. Medical debt is common and 11% have that in collections. The median medical debt in collections is $702.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.