Having unsettled credit card debt can be very stressful. If you are delinquent in your monthly payments, the late fees and penalties will also add up and before you know it, this could result in ballooning your debt. In some cases, these penalties can even make up a significant portion of your total debt amount.
One of the options that you might have heard of is debt settlement. If you have credit card debt with Citibank, you might be wondering whether it’s possible to get a debt settlement with them. Does Citibank negotiate credit card debt? How do you negotiate a debt settlement with Citibank if you have a Citi Card?
In this article, we will outline the steps that you need to follow if you are considering negotiating a debt settlement deal with Citibank.
Step 1: Understand What Debt Settlement Is
First, you need to understand what debt settlement is and how it’s different from other debt relief options. This is important before you even start talking to any party because depending on who you’re talking to, you will be offered a variety of options to relieve your credit card debt and you might end up agreeing to a different plan that you can’t afford or does not really help you reduce your debt.
So What is Debt Settlement?
Debt settlement is a debt relief option offered by banks and credit card issuers wherein they will forgive a portion of your debt if you agree to pay the amount agreed or offered in the settlement. This means that instead of paying 100% of your total debt amount, the credit card company will agree to erase your debt if you pay an agreed percentage. This percentage can range from 30% to 50% of your debt (sometimes higher).
Let’s say you owe a total of $5,000 on your credit card. If you get a debt settlement offer of 50% one-time payment, then that means you will only need to pay $2,500 now and the rest of your debt will be erased.
The reason why credit card companies agree to a debt settlement is that they would rather get paid something rather than get nothing at all. Take note that credit card debt is categorized as unsecured debt meaning they have no collateral like a mortgage or an auto loan so they can’t really recover anything from you unless they sue you in court and pursue a judgment.
While there are debt settlement companies that you can hire to do this process for you, you can do this yourself. It might be time-consuming but you also minimize the risk of being scammed by unscrupulous debt settlement companies.
How is Debt Settlement Different from Other Debt Relief Options?
If you make a quick search online on how to negotiate a debt settlement, you will find other terms such as debt management, debt consolidation, payment assistance, or workout agreements. Take note that these are all different from what a debt settlement is because while they may offer you some relief, they do not significantly reduce your debt like how a debt settlement will.
However, these debt relief methods are also valid options in case you are not granted a debt settlement. These options will be discussed later in the article.
Does Citibank Offer Debt Settlement?
Citibank is one of the biggest banks in America. In fact, they are the 4th largest retail bank in the United States. Some people think Citibank is notorious for being a difficult bank to deal with when it comes to debt settlement but according to its customers, Citibank does agree or offer credit card debt settlements.
For example, one previous customer in a myFICO discussion thread shared that Citibank offered him a 40% debt settlement, which means he will only pay 40% of his total debt for it to be erased. Another Reddit user said that he was offered an $800 settlement to erase his $3,000 debt. This means he only had to pay around 27% of his debt. These customer stories show that it is possible to get offered a debt settlement from Citibank.
Step 2: Evaluate Your Finances
Now that you know what debt settlement is, the next step is to carefully evaluate your finances. This means doing a comprehensive review of your income, your monthly bills, your debts, and whatever expenses you have.
Check your credit card statement and also request a free copy of your credit report from AnnualCreditReport.com to get a full picture of your financial situation. Answering the following questions below will help:
- How much income are you expecting every month?
- How much debt do you have in total?
- How much money goes to your monthly bills?
- How much is the current balance credit card bill you want to settle?
Out of the total amount of your credit card bill, how much is the principal amount (money you actually spent) versus the fees (interest, late payment fees, penalties, and other fees)?
Step 3: Determine How Much Money You Can Afford to Offer
After a thorough assessment of your finances, you now have the tools to determine whether you can afford a debt settlement in the first place. Most of the time, Citibank or any other credit card company will be more amenable to agreeing or offering a debt settlement option if you can manage a one-time or lump sum settlement.
For larger amounts, they may be open to a short-term payment plan like 3 months. Longer than that, they may be hesitant to agree as you might not be able to pay those installments.
Check your finances on whether you can afford to shell out that amount as a one-time or lump sum payment. Will you only be able to afford a 30% debt settlement or will a 50% reduction be something you can manage? What expenses can you save now to be able to come up with the money needed for the one-time payment offer?
Step 4: Contact Your Credit Card Company or Debt Collection Agency
Even if your debt is with Citibank, the company that you need to contact will depend on how long you have been delinquent on your credit card bill. If your due date is less than 180 days (6 months), it may still be with Citibank’s collections department. This means you need to call Citibank directly to negotiate the debt settlement.
When dealing with Citibank directly, the fastest way is to call them by phone or send messages through their online platform rather than sending letters by registered mail which can take time. The reason for this is because by the time you can get the physical letter exchange sorted out, your debt might be “charged off” already and turned over already to a debt collections agency.
If the delinquency is more than 6 months and you have been receiving calls from a debt collection agency, it means you have to settle with that collections agency. In this case, it may serve you well to keep your communication through emails or physical letters instead of communicating by phone so you have a record of your conversation.
Citibank Online Access Set-up
Register Here
Citibank Payment Assistance Team
1-866-905-2784
Outside the US, call collect at 605-335-2222
Citibank Credit Cards General Support & Servicing
1-800-950-5114
Debt Collection Agencies
Check with your last notice or bill to find the contact details of the debt collection agency.
Step 5: Explain Your Situation and Your Desire to Settle
Whether you are reaching out to Citibank or to the collections agency through phone, messages, or a letter, the next step is to explain your current financial situation. The most important thing is to show and convince them that while you want to pay the amount, it is impossible for you to do so as you are financially incapable to pay.
You can talk about your personal reasons like losing your job, having an illness, death of a family member, or any hardship that you’re experiencing. You have to convince your credit card provider that if they do not agree to settle the debt, then you really have no choice but to stay delinquent and file for bankruptcy. If you are considering filing for bankruptcy, don’t be scared to mention that to them.
Step 6: Start Negotiating the Debt Settlement
If you are the one proposing the debt settlement, start the offer at 20% to 30% of the debt amount. If you are offered more than 50% of the debt amount, negotiate lower and try getting it below the halfway mark. Based on customer stories online shared earlier in this article, Citibank has been known to offer 40% or even lower.
You might be able to negotiate a lower amount depending on your personal financial situation. Usually, the older the debt, the more amenable they are in negotiating.
Step 7: Have the Settlement Agreement in Writing Before Paying Any Amount
In case Citibank or the debt collections agency agrees to settle your credit card debt, make sure to get the agreement in writing BEFORE you pay any amount. This document is important because it will outline what will be done after you settle the debt. A typical debt settlement document will contain and confirm the following:
- The amount you need to pay
- How many times you need to pay the amount (one-time or installment)
- What fees and penalties will be waived
- That your debt will be Zero after the payment
- That your account will not be referred to a collections agency or law firm
- That they will stop all efforts to collect
- The deadline on when you need to issue the payment
After getting the written document and you find it acceptable, you can pay the amount. Make sure to keep and maintain all records of payment.
What Are My Other Options if I Don’t Get a Debt Settlement?
If you do not get offered a debt settlement option, there are other options that you can explore.
- Try again. In some cases, you might get refused a debt settlement by your credit card company if you ask for it too soon. If you still can’t manage any solution, try requesting again after a couple of months.
- Payment assistance plans. Many banks offer payment assistance plans also known as hardship plans that can help you lower your minimum credit card payments, waive fees, or may even get you forbearance that will halt your monthly payments without penalty. While this may not considerably reduce your debt, this has financial benefits and savings especially if you have no means of coming up with a lump sum amount. Citibank offers Assistance Programs to its customers due to the coronavirus pandemic so you can manage your credit card debt without hurting your credit score.
- Debt consolidation. If you have multiple credit cards, this product allows you to combine all your debts and just pay one monthly fee through a balance transfer. This could be beneficial if you get a lower interest rate or even a zero interest rate deal.
- Debt management. Debt management does not reduce your debt, rather, a credit counseling agency or professional helps you manage your debt. This third-party can negotiate a payment plan for you with your creditors.
- Bankruptcy. This should be the last resort. While a bankruptcy filing could discharge your personal credit card debts, it also has a long-lasting impact as it can stay on your credit report for 10 years and can impact your ability to get approved for future credit.
Getting a Debt Settlement from Citibank
While many customers attest that it is not easy to get a credit card debt settlement offer, it is not impossible to get offered one. However, you have to prove that you really do not have the means to pay the full amount and they cannot get any more money from you. The credit card company will not agree to a debt settlement if they can see that you have the money to do so. They will just flatly refuse and proceed to sue you in court. This could result in your wages being garnished or having your bank account levied.
If you really are in a tough situation and you’re unable to manage your credit card bills, remember that negotiating with your credit card company now to manage your debts is better than just ignoring your debts which can put you at risk of getting sued.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
