Has anyone ever negotiated with a credit card company to lower their balance payoff?

We are refinancing our house to pay off some credit card debt. I have heard that the debt management companies will negotiate on your behalf and either lower the interest rates or lower the amount they will accept to pay off the debt. I have also heard you can do that yourself.

Anyone have any experience with this tactic? I have also heard that trying to settle for a percentage of your balance will wreak havoc on your credit rating. Is it worth it to save a couple of thousand dollars?

Do you try and reach an agreement with the first CSR you talk with, or does it only count if you negotiate with a manager or other official? Should you get the agreement in writing, as well as any effects on the credit rating? What is an appopriate percentage to ask for (50%? 60%?), or does it depend on factors like amount owed, past payment practices, etc.? Does it help to threaten you might be filing for bankruptcy if they do not settle?

Has anyone ever negotiated with a credit card company to lower their balance payoff?

First, it is a very bad idea to refinance and roll unsecured credit card debt into your mortgage. All too often folks just run the credit cards back up and have the credit card payments and a bigger house payment. This is how folks lose their homes.

Second, debt consolidation companies get credit cards to take lowball settlements by taking monthly fees from you and not paying any of your bills for 3 months. Then they make the lowball offers under threat that you will file bankruptcy. Needless to say, this method completely trashes your credit. Also, more and more credit card companies refuse to play the game and just sue you.

Third, credit card companies have absolutely no incentive to settle current accounts for less than the full balance. You will never get them to agree to a 50% or 60% settlement. Those kind of settlements only work when dealing with collection agencies if the account has been in default for a couple years.

Has anyone ever negotiated with a credit card company to lower their balance payoff?

It is better to do the negotiations yourself, rather than with an outside company. Credit card companies would rather deal with you, the customer. Not to mention the fact that in most cases, you will have to pay for the debt negotiation services you receive from a third party.

You will need to be prepared to talk about your financial situation, stating your income, your debt, and the reasons why you want to settle the account. If you are past due, you may find that you have better luck, because they would rather settle with you, than let the account go into charge-off status at six months behind.

Before you send any money in, make certain you receive something in writing, and only then should you pay the balance. Most companies will require you to pay 70% of your debt, unless you have some kind of extreme circumstances. Threatening bankruptcy or charge-off will not help, just be nice, explain the situation, and see how far you get.

If need be, ask to talk with a collection unit manager, because they will likely be the ones to approve the settlement in the first place.

Be aware though, if the company agrees to waive anything over $600, you will be required to claim that on your taxes as taxable income the next year.