How much do credit card companies usually settle for?

Credit card debt has reached new record highs this year, due, in large part, to the tough economic landscape we're facing, and that means the monthly payments are becoming increasingly difficult to manage for many people. Further complicating the issue is the fact that average credit card APRs are now hovering above 22%, which means that the interest charges compound quickly for those carrying a balance. And, while the Federal Reserve has begun to ease rates, card issuers rarely pass down those savings to cardholders. When they do, the process tends to be a slow one.

As a result, more borrowers are now struggling to keep up with their growing credit card balances as the interest charges continue to accrue over time. That's why the idea of credit card debt settlement — which is a process in which a credit card company agrees to accept less than what's owed — is becoming a more common option for cardholders to consider. And, that means lenders are facing an uncomfortable reality of their own: With serious delinquencies and pressure on borrowers climbing, not every balance will be paid in full. 

But while debt settlement can be a way to get relief, the amount that's forgiven during the process isn't set in stone. Each credit card company has its own approach, so how much can you realistically expect a card issuer to settle for? That's what we'll detail below.

Find out how you can start settling your credit card debt for less.

How much do credit card companies usually settle for?

Here's the short answer: If you make a strong case during negotiations, most credit card companies will agree to reduce your total outstanding balance by 30% to 50% on average. That means if you owe $10,000, you might be able to negotiate paying $5,000 to $7,000 instead. In other words, you'd get $3,000 to $5,000 knocked off what you owe. However, this range isn't set in stone. It's more like a starting point for negotiations.

Several factors influence where your settlement might land within that spectrum. The age of your debt matters considerably, for example. If your account is only 60 days past due, creditors are less likely to accept a much lower offer because they still believe they can collect the full amount. Once your debt hits 180 days delinquent and gets charged off, though? That's when credit card companies become much more motivated to settle, because at that point, they've already written off the debt as a loss on their books. 

Your financial circumstances play an equally crucial role. If you can demonstrate genuine financial hardship — maybe you lost your job, faced a serious medical emergency or experienced another legitimate crisis — credit card companies are often more willing to negotiate. They know that getting a substantial portion of the debt today beats chasing someone through collections for years with nothing to show for it.

The type of creditor also matters. Major credit card issuers might have different settlement policies than smaller regional banks or credit unions. Some companies have formal hardship programs, while others handle negotiations on a case-by-case basis. And, once your debt gets sold to a collection agency (which typically happens after 180 days), you might find even more flexibility. Collection agencies often purchase debts for pennies on the dollar, so they can often afford to offer deeper discounts and still make a profit.

Learn more about the debt relief options available to you here.

How to increase the chances of settling your debt for less

Getting a credit card company to settle for less takes strategy, and often, a professional touch. Here are a few ways to improve your odds of success:

Work with a debt relief company

Reputable debt relief companies specialize in negotiating with creditors on your behalf. They understand lender policies, know how to present your hardship case and can often secure better settlement percentages than most people can get on their own. While there are fees involved, and while you'll have to qualify to enroll, the savings and structure can make it worthwhile for borrowers struggling to manage negotiations on their own.

Demonstrate genuine financial hardship

Lenders generally won't settle with borrowers who appear to have the means to pay in full. Creditors are generally more willing to negotiate, though, if you can show clear proof of hardship, like job loss, reduced income, medical expenses or major life changes. Be honest, provide documentation if asked and emphasize that you want to repay what you can afford. 

Be ready with a realistic offer

As a general rule, it helps to start low but reasonable at around 30% of the total balance and expect to negotiate up from there. And, having cash ready for a lump-sum payment gives you stronger leverage. If you're working through a debt relief company, they'll handle these details for you.

Be patient with the process

Settlements don't happen overnight. Creditors often take weeks or even months to review and respond to the offers you make, so be patient and stay the course. You should also be sure to avoid making any new payments or promises during this time, as that can complicate the process or kill negotiations altogether.

The bottom line

Credit card debt settlement can provide genuine relief when you're facing financial hardship. While the outcome varies, credit card companies will generally agree to lower your balance by 30% to 50% on average during settlement negotiations. The exact figure depends on your situation, the creditor and your approach, though. If you're feeling overwhelmed or unsure how to start, working with a trusted debt relief company can make all the difference. By doing so, you can ensure that you negotiate from a position of strength and confidence, not desperation.