Debt Settlement Discover Card

May 30th, 2010

Question: Credit Card Company Offered Settlement, Should I take it?

I have been on a debt payment plan for 6 months, but withdrew after I found out I could be paying less interest than with the credit counseling agency. I also thought the $50 monthly fee was a waste of money that could be going towards the debt. I contacted one of my credit card companies, Discover, and they offered me an internal payment plan that was more than the minimum payment, lower interest than with the counseling agency, and I agreed and am using that. With Chase, I called and they offered either a monthly payment program, and he also told me they would settle for 60% of the debt, so the $2700 I owe would be $1600, and I could make 4 monthly payment and be done with it. Should I do this? What are the pros and cons? I can make the 4 payments financially. I’m not worried about my credit report, I have no need for financing, I’ve changed my spending habits and have used cash only for 8 months now. I just want to put this debt behind me. Tips? Thanks!

Answer: Good for you, you’re on the right track.

There’s no magic number regarding how low a credit card company will go to get a settlement. They simply want as much money as possible, so if they think they can get $1600 by offering you a settlement that’s better than having a $2700 debt on the books that you never pay.

I would start by offering them about $1200 for the debt, and see where that gets you. Never accept a first offer. But if they don’t budge, $1600 is a good deal since it allows you to pay this debt off in 4 months.

The key to dealing will collections people is to get everything in writing. Don’t send them a dime until you have your agreement in writing in your hand. Never send payment based on a verbal promise of a settlement and never send it based on a promise that the paperwork is in the mail. Keep good records and make sure their paperwork clearly states the payment structure, and the fact that those payments settle the debt in full.

Congratulations on being on the road to being debt free.

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