One of the great truths in business is that everything is negotiable. Even when the price or terms of something seem set in stone, getting a discount is often as easy as knowing whom to ask and knowing how to ask for it.

When it comes to the balances you owe on your credit cards, the opportunity to negotiate what you actually owe is as great as ever. With a little bit of knowledge and guts, you might be able to cut your balances by 50-70%. Read on to find out how.

The Basics of Debt Settlement
Debt settlement is the process of offering a large, one-time payment toward an existing balance in return for the forgiveness of the remaining debt. For example, someone who owes $10,000 on a single credit card may approach their credit card company and offer a one-time payment of $6,000. In return for this one-time payment, the credit card company agrees to forgive or erase the remaining $4,000.

Why would a credit card issuer willingly choose to forgo a substantial portion of the balance it is owed? Usually it's because the credit card issuer is either strapped for cash itself or is fearful of your eventual inability to pay off the entire balance. In both situations, the credit card issuer is trying to protect its financial bottom line - a key fact to remember as you begin negotiating. Remember, credit cards generally represent unsecured loans, which means that there is no "collateral" your credit card company can seize to help repay an unpaid balance. (To learn more, read Negotiating A Debt Settlement.)

While getting your company to settle your balance may sound too good to be true, it's not. Not surprisingly, lenders don't like to advertise settlement and there are no independent statistics about it success rate, but if you're severely behind on your debt payments and spiraling toward bankruptcy, your lender may be willing to take what it can get, giving you one last chance to get back on your feet.

The Downside of Debt Settlement
Although a debt settlement has some serious advantages, like eliminating a monthly payment and making your current debt load look smaller to potential lenders, it also has a couple of substantial shortfalls you need to consider. Failing to take these into account can potentially put you in a more stressful situation than before.

A debt settlement generally requires you to come up with a substantial amount of cash at one time. Remember, this is what makes the debt settlement attractive to your lenders. Instead of receiving minimum monthly payments for the next few years, they're getting a much larger payment now.

Because most people in debt do not have a substantial amount of money just lying around in their bank accounts, you'll need to stop and consider where the funds are going to come from and how that money could be used elsewhere in your personal finances. In short, you need to be sure that the money you're using isn't going to leave you in a tight spot a few months down the road.

Debt settlements will usually show up on your credit report and lower your credit score, hurting your ability to get affordable loans for the next few years. In essence, when another lender looks at your report, they'll see you have a history of not paying back what you originally borrowed. It's not hard to imagine that this would make a lender less anxious to lend you a large sum of money. Typically, a debt settlement will substantially hurt your credit score for two to four years and remain on your report for up to seven years. (For further reading, see The Importance Of Your Credit Rating.)

How to Attempt a Debt Settlement
If you decide that a debt settlement is the right move for you, the next step is to decide if you want to do it yourself or hire a professional. In making this decision, it's important to keep in mind that your credit card company must deal with you and that a debt professional has no real ability to negotiate a better deal than the actual account holder. Furthermore, the debt settlement industry has its fair share of con artists, rip-offs, and scams. With that in mind, many people wisely choose to try it on their own first.

Whether you choose to use a professional or not, one of the key ingredients in negotiating a successful debt settlement is to make it appear that you're really in a bad position financially. If your lender truly believes that you're between a rock and a hard place, it will be more likely to believe that that it will lose out by rejecting your offer.

For example, when the manager of your credit card company's debt settlement department looks at your last few months' statements and sees numerous trips to five-star restaurants or designer label shopping sprees, it will be unlikely to view you as truly in need or worthy of sympathy. To raise your chances of success, you should cut your spending on that card down to zero for a three- to six-month period prior to requesting a settlement.

On the same note, if you've been making your minimum payment (or more than the minimum) on time every month, you look like someone who is on the verge of walking away from your debt obligations. With this in mind, your debt settlement offers should be directed toward companies where you've fallen behind on your payments.

When it comes time to settle, you'll want to start the process by calling the main phone number for your credit card's customer service department and asking to speak to someone in the "settlements department." Once you have someone from this department on the phone, you'll want to explain how dire your situation is. Highlight the fact that you've scraped a little bit of cash together and are hoping to settle one of your accounts before the money gets used up elsewhere. By mentioning the fact that you have multiple accounts on which you're pursuing debt settlements, you're more likely to get a competitive offer from any one company as it attempts to compete for your cash.

As a rule of thumb, start by offering your lender a specific dollar amount that is roughly 30% of your outstanding balance on the account. Chances are, it will counter your offer with a higher percentage or dollar amount. If the lender offers you anything above 50%, consider trying to settle with a different creditor or saving the money to help you pay future monthly bills.

Last but not least, once you've finalized your debt settlement with your lender, be sure to get the agreement in writing. It's not unheard of for a credit card company to verbally agree to a debt settlement, only to turn over the remaining balance to a collections agency. Be sure the written agreement spells out the amount you have to pay in order to have your entire balance excused from further payment. (For more tips on negotiation, see Seven Tips For The Do-It Yourself Debt Manager and Getting What You Want.)

If They Say "No"
While the possibility of negotiating a settlement should encourage everyone to try, there's a good chance you'll hear a "no" somewhere along the way. If this is the case, don't just hang up the phone and walk away, or you may miss out on another great opportunity to save yourself some money.

This would be a great time to ask your credit card company if it can lower your card's annual percentage rate (APR), lower your monthly payment, or provide an alternative payment plan. Many times, your credit card's debt settlement representative feels bad for having to say "no" and may be more apt to say "yes" to one of these other options.

For more on lowering your APR, see Cut Credit Card Bills By Negotiating A Lower APR.

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