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Negotiate Credit Card Debt Like a Pro

By Dan Caplinger – Updated Apr 7, 2017 at 12:31PM

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Play card issuers against each other and save.

Once you've racked up a bunch of credit card debt, getting rid of it can be the toughest financial challenge you've ever faced. Yet what many people don't realize is that they can successfully negotiate credit card debt away, often with only minimal effort. Below, we'll give you some negotiating tips, but first, let's look at why you actually have more leverage to negotiate with card companies than you might think.

The dog-eat-dog world of credit cards
When it's you against a banking behemoth, you might think you're doomed to get the short end of the stick. But the key to successfully negotiating with your bank is to understand that your debt is their asset, and it's valuable to them to keep it rather than giving it up.

In fact, credit card debt is so valuable to card issuers that they fight each other constantly for your business. At various points during the past year, for instance, JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), American Express (NYSE: AXP), and Bank of America (NYSE: BAC) have all given new cardholders offers that include bonuses worth hundreds of dollars in cash or airline miles just to sign up.

With card companies paying that much just to get new customers -- some of whom may never actually incur interest charges at all -- they should be willing to pay more to retain your business if you have an outstanding balance that you're paying interest on. After all, if you don't pay off your credit card debt every month, you're among the most lucrative class of customers from a bank's perspective.

Opening the negotiation
The first step to successfully negotiating your credit card debt is to do your homework. If you have multiple credit cards and one of them is offering you an opportunity to transfer a balance at a low rate, make sure you understand exactly how that deal works. If you don't, look around at various offers on the Internet or in print advertisements to find out about offers that you may qualify for.

Once you have an idea of what you can expect from competitors, call up the customer service phone number on the back of your credit card. Give the customer service representative who answers a simple description of the problem: that you've seen a competing financial institution offering the same type of credit card with a more favorable interest rate, and you'll have no choice but to transfer your balances to that competitor if your current bank can't match the lower rate. Here's a helpful script you can use.

Sometimes, the rep will be able to give you a better deal on the spot. Other times, you may get a scripted response, in which case you can ask to speak to a supervisor who may have more power to negotiate with you, or you can just call back at a later date hoping to get a more agreeable rep who'll do more to help you.

You can also negotiate for more than just a rate decrease. For instance, if you're truly in over your head, you can sometimes get your card company to write off a portion of your credit card debt in exchange for a partial payment upfront. It'll take a lot more than just a phone call, but under certain circumstances, you may be able to get your bank to make a big part of your outstanding balance disappear.

Be strong
When your debt is already out of control, it's hard to build up the confidence you need to stand up to your bank. But once you realize just how interested your bank should be to keep your business, you'll realize just how much leverage you have to negotiate your credit card debt down to a more manageable level. And since the worst that can happen is that your bank will say no, there's nothing to lose and everything to gain.

When you realize how lucrative credit cards are for banks, you'll want to profit from them yourself by investing in the banks that issue them. Bank of America is a huge card issuer and has a lot of profit potential, but it will have to overcome some roadblocks in order to succeed. Learn all about those pros and cons in the Fool's premium report on Bank of America, in which our top banking analysts look at prospects for the company. Click here and get your report today.

Fool contributor Dan Caplinger successfully negotiated debt reductions for several clients in his law firm days. You can follow him on Twitter @DanCaplinger. He owns warrants on JPMorgan Chase. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Motley Fool newsletter services have recommended writing a covered strangle position in American Express. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always treats you like a pro.

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