Will credit card companies settle for less?

calculator saying helpQ: I have a massive amount of credit card debt from medical bills but don’t like the idea of using a debt settlement company because I hear so many stories of them scamming people. Will credit card companies settle for less? Will they negotiate debt with me directly? Or do I need to hire a company to do it for me?

A: At one time I had also had a massive amount of debt from medical bills, so I can definitely feel your pain! Fortunately, I was able to find ways to pay it down completely without resorting to debt negotiation or default, however if I was faced with that same dilemma in today’s economy, I doubt I would have been so lucky.

Going back to your question… will credit card companies companies settle for less by dealing with you directly? The answer is if you know what you’re doing, they should be just as inclined to settle with you as they would be with a settlement company. However please note that some card issuers have a policy of not negotiating debt, regardless of whether it’s through a settlement company or doing it yourself.

Now let’s go over the basics for each route, including their pros and cons:

Settlement Using a Company
In a nutshell, here’s how they work. Let’s say you have $10,000 in credit card debt you want to settle. The debt settlement company will ask you to stop making payments on your credit cards as soon as you signup with them. They will also collect a hefty deposit from you each month – on a $10k debt this might be $600 or $800 per month. This will go on for several months until they have collected several thousand dollars from you. They will then contact your credit card companies and ask them to settle for that amount.


  • They handle the negotiation, but that usually only consists of a couple phone calls and/or a form letter sent to the credit card company asking to settle your debt for X number of dollars.
  • Collecting the monthly deposit from you might be beneficial for those who would otherwise not be disciplined enough to save the money on their own over a period of half a year or so.


  • The vast majority of debt settlement companies are scammers. They charge outrageous fees (however there are few that charge a flat % fee which is more reasonable).
  • Once they have you stop making payments on your cards, your credit will be shot after a few months. Furthermore, during this time you be levied default APRs, late fees, etc. which only makes your debt grow even bigger.
  • Let’s say the plan is to collect your monthly deposit for 6 months, but 3 months into it you can no longer afford to pay. With many plans, the money you deposited up to that point may be forfeited and kept by the company- they claim you didn’t follow through on your end of the agreement and therefore they can keep the money.
  • Will credit card companies negotiate debt with them? There is no guarantee. Some banks would rather charge off bad debts and take the tax write-off.

Do It Yourself Debt Settlement
There are a number of various approaches people might try, but usually they are based on the same concept as above – asking your credit card companies to settle for a lump sum.


  • Since you are doing the process yourself, there are no fees to pay to anyone else.
  • You won’t have to worry about getting scammed by a shady debt settlement company, since the money will remain in your hands.


  • Unfortunately, most credit cards won’t settle for a lower amount until you have stopped making payments on your account. Therefore, your credit score will still be take a major hit (the effect may be as bad as a bankruptcy).
  • You need to know what you’re doing and even then there is definitely no guarantee that it will work (and on that note, debt settlement companies rarely make guarantee either)
  • It requires discipline to come up with a lump some of money, if you don’t already have another source of money you can tap (which is unlikely, if you’re in this dilemma)

Which approach is right for you?
Do as much research as possible and even consult a professional financial adviser to get their opinion (because this article is for informational purposes only and should NOT be misconstrued as financial advice).

*Important Warnings*
If you decide to hire someone to do it, I would like to point out you should not be fooled by so called not for profit debt settlement or those that claim to be Christian, etc. Technically there are countless firms that can be set up in a way where they legally can claim they are “not for profit” but often times the only reason they set it up that way is for marketing purposes. The ones that pray on people by wrongly claiming they are Christians is stooping to the ultimate low in my book.

If you decide to try do it yourself debt settlement, I do know there are plenty of online guides of how to do debt settlement on your own. However I have not personally reviewed any of them, therefore I cannot make any recommendations as to the usefulness/accuracy of their information.

The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

Not all credit card companies will settle for less.