How to Settle American Express Credit Card Debt

By on August 8, 2011
How to Settle American Express Credit Card Debt

If you’re facing a legitimate financial hardship and can’t make the minimum payments on your American Express credit card one potential solution is to negotiate a lump-sum settlement for less the balance owed.

If you’re unfamiliar with debt settlement, you’re probably wondering how someone who can’t make their monthly payments would have the funds needed for a settlement at, say, 50% of the total balance.

But there is a huge difference between income and assets, and many consumers who can’t sustain regular monthly payments due to lack of income or other financial hardship are able to use some of their dwindling savings for the purpose of settlements. Other sources for funding settlements might include the sale of household items, collections, cash value life insurance policies, borrowing from family, or sale of property. These are one-time funding sources, in other words.

Once the money received from a one-time source has been expended, there is no more to replace it. But such funds can be put to excellent use in retiring a major credit card debt, when otherwise the customer would just be facing an unsustainable situation (which in turn often leads to bankruptcy).

When it comes to settlement with American Express, there are some specific facts about this creditor that you should be aware of. Prior to the financial crisis of 2008, American Express was not a bank like most other major credit card issuers (such as Bank of America, JP Morgan Chase, Citibank, etc.). The company converted to a bank holding company structure in November 2008 in order to become eligible for Treasury Department assistance under the infamous “TARP” program. The reason this matters is because there are some important differences that need to be taken into account in terms of the “collection culture” at different types of creditors.

For example, most of the major credit card banks eventually SELL their delinquent accounts to various debt purchasing companies, so when you are trying to settle an old charge-off account it’s very possible that you’ll be dealing with a debt purchaser or their collection agency. Yet it’s highly unlikely you will encounter this situation with respect to any type of American Express account. This creditor rarely sells its accounts, no matter how old. It’s simply a part of the collection culture that developed at American Express, which positioned itself over the years as being “different” than Visa or MasterCard.

Why this is relevant if you’re trying to reach a settlement with American Express

Many websites offering advice on settlement of credit card accounts recommend sending “debt validation” notices to collection agencies or creditors, in theory “putting them on notice” that you are aware of your consumer rights and demanding copies of their backup documentation. There are definitely situations where a debt validation letter is appropriate and effective. However, when you are trying to settle an American Express account, it would be a major tactical mistake. The reason is because they have the documentation. It’s trivially easy for an original creditor to produce a stack of monthly statements two inches thick and mail it to you. Voila. Debt validated, and account moved to an in-state legal firm for your troubles!

READ  My Income is Dropping and I Want to Settle My American Express Card

The first rule in settlement with American Express is therefore to avoid any sort of tactical “games” like debt validation, which are generally unnecessary anyway. I always recommend proactive telephone with creditors, and American Express is certainly no exception. Get on the phone a couple of times a month and let them know about your situation. Be aware that you’ll hear various kinds of options presented to you depending on how far behind you are on payments. For example, if you are two payments behind, the representative will generally not discuss settlement yet and will only speak in terms of different payment options. Listen carefully to these proposals and note them down. Sometimes these alternate programs can include low interest rates and lower monthly payments, and for some consumers this level of relief alone may provide sufficient breathing room to get a handle on their financial situation.

If you’re more than three payments late, the odds are good that you’ll be hearing from an outside collection agency. It’s quite common for American Express to assign their accounts to third-party collection agencies well before the point of charge-off at 180 days late, often as early as 90 days late. Don’t panic if this happens! Understand that the majority of settlements with American Express are negotiated through these third-party collection agencies.

Achieving a settlement with any creditor is a matter of balancing RISK versus SAVINGS. You’re in a financial crisis and want to obtain as deep a discount off your balance as possible, but you also have to be mindful of the legal risk that mounts whenever you are behind on payments with a creditor. One important tip for determining the risk factor is to assess WHERE the assigned collection agency is located. If they are not a law firm and they are in some other state than yours, then the situation is low risk compared to assignment to a law firm in your state. American Express is not a “bluff” creditor, so we do take any legal threats from them seriously once a file has escalated to placement with a collection attorney firm (licensed to operate in the client’s home state). In such situations, the risk is greater, so we accept a higher figure than we might otherwise. Where the risk is lower, we can hold out and try to do better on the settlement percentage.

Let’s say you are talking with a third-party agency in a different state and they have agreed to a 40% settlement. You are happy with the result and you can fund the settlement ok. The one unbreakable rule in debt settlement is to GET IT IN WRITING FIRST, before you pay! You must have a letter in-hand before you make payment on your settlement. There are NO exceptions to this rule.

A faxed copy is fine, and in fact most settlement letters are just fax copies of the agreement. This isn’t a matter of “trust,” or “distrust.” It’s just simple common sense that any agreement modifying your contract with American Express (or any other creditor) must be in writing. If you have a debt collector balking at putting the settlement in writing, then just put your foot down and insist that you will only proceed on the basis of a written agreement letter. It doesn’t have to be long! It just has to cover the essentials – the account number, amount of settlement to be paid, any payment installments listed clearly with due-dates, and the transaction has to be defined or referred to as a “settlement,” or “settlement-in-full.” Simple enough!

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With your letter in hand, then you can make your payment. Cashier’s check by Federal Express is one method, but you want to be sure that you’ve coordinated payment method with the agency. Most of them prefer check-by-phone or electronic check (same thing). This is also called an ACH transaction, and it means you provide them the bank routing number and account number off your checking account. If you have it in writing first, it’s ok to do this. If you are negotiating settlements with multiple creditors, it’s better to set up a special checking account for this purpose. That way you can react quickly in case anything goes amiss.

One more important point about settlements with American Express. Many consumers have both personal and corporate cards issued by this creditor. It’s common to carry a personal account and then receive one issued by your employer, to cover work-related travel expenses, per diem costs, and so on. The corporate cards are generally issued to the corporation itself, even though your name appears on the card, so generally it is not advisable to attempt settlement on this type of account, as it could have a direct effect on your employment status.

Take the high road and negotiate in good faith with your creditors. Don’t play games or make up stories about your situation. If you are in a financial crisis, that is enough, and you just need to be patient and persistent. Start out with an offer around 20-25% of what you owe, but state this in terms of a dollar amount. You are aiming for a financial outcome that you can live with, not a world-record low percentage. As the negotiation proceeds, resist your initial urge to jump your offer right away, and give it some time to see how things go first. You can always increase later. The first offer you receive from an agency will rarely be the best offer available, no matter how convincing the explanation that this is “the best we can do.”

Over time, and with a series of negotiation calls, it’s possible to reach a settlement agreement on your American Express card that you can handle. Don’t be greedy. Once you reach your goal, accept the settlement and take the deal off the table. If you’re like most clients, you’ll feel a tremendous sense of empowerment at achieving a successful settlement. It can be a huge game changer financially, as well emotionally.

If you’re drowning in debt and want some expert advice and coaching as you negotiate through your settlements, please visit us at . We offer training and coaching programs for every budget, and our mission is to help you negotiate effectively and settle your debt accounts quickly and safely.

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28 Comments

  1. Jose Ramotti

    October 2, 2018 at 9:14 am

    Hello,

    I have a $19,000 balance with American Express. I also have like 500,000 points. If I settle what will happen to the points? Can they be applied against the settlement amount?

  2. Jim Gillingham

    September 19, 2018 at 3:29 am

    I am currently in the process of trying to kill off my Macy’s acct. American Express is the contractor. I have called the service number several times – usually from the service desk at Macy’s. It is literally impossible to mail a check fast enough to kill the account without another fee being added. If I overpay, The fee for too much in the account is always enough to put the account in debt again. Advice?

  3. ND

    April 25, 2018 at 5:05 pm

    Hello, I have a credit card with American Express that has an outstanding balance of around $12,000.00. I have been making minimum payments on time for the past 2-3 years and most of it is interest and my balance remains almost the same. I’m thinking to stop making minimum payments and try to settle my account. What are my chances and what kind of approach should I take. Further, if the account is settled for the less amount than the balance, how does this affect my credit score?

    • Steve Rhode

      April 27, 2018 at 11:32 am

      I think the article will give you the basic answers to your question.

  4. Emily

    December 30, 2017 at 9:32 pm

    Hi Charles,

    Am I able to negotiate a settlement with the 3rd-party collections agency in exchange for them removing the charge-off from my credit report? I read somewhere that that can only be negotiated through the original creditor since they are the ones who reported the charge-off, but I’m not sure how that works with American Express.

  5. Monnikka

    January 12, 2017 at 6:46 pm

    Hi Charles,

    I have a corporate card that my former employer claimed I had personal purchases on. The former employer reversed total charges of $13K after I left the firm and told me to pay it. I was sent a list of charges but believed I was not responsible for half of those charges. however, the former employer insisted that I was fully responsible. So I panicked since I only knew about this today. I called Amex and they said they would not report to credit agency and I assume that means the delinquency of this charge will not affect my credit score. The charge is past due 3 months or so and I made a payment of $5K today. That’s all I can afford. Amex also told me they would hand it to a collection agency if they didn’t get the rest in 10 days I told them not possible. So should I wait until the collection agency to me and negotiate a discount on the rest of the balance? I have a personal Amex account and a corporate Amex with my new employer, so far they don’t seem to get affected. Will this change when Amex hand over the former employer’s balance to the agency? I might leave the country permanently in a couple of month, can I tell the agency that and try to settle for less? Amex does not have my phone number or address, only the email address. I’m not sure what to do since I still believe I’m not fully responsible for the charges, and I cannot afford and do not want to pay. Thanks a lot for any insight!

  6. Joe Schmo

    February 28, 2015 at 11:08 am

    We are in a debt mgmt program with consumer credit counseling and American Express is one of our debtors.

    Everything was going fine for a 4-5 months and all the sudden the AMX account shows as a Charge Off on my credit report which I think is having a significantly negative effect.

    Any idea why they would do this when the other accounts from other creditors are just listed as something like “Closed – debt mgmt plan”?

    If they are considering me a charge off, then that doesn’t give me a ton of motivation to continue to pay regular monthly payments!

    • Charles Phelan

      February 28, 2015 at 11:16 am

      Joe, I recommend you check with your debt management provider to see if American Express accepted their proposal. It sounds like this account is not actually enrolled, and they are just sending payments in on your behalf. If those payments were under the required minimums, that could account for the charge-off notation.

  7. O-Man

    October 8, 2012 at 11:45 pm

    I have an account with AmEx that charged-off in 2006 (original c/o amount was $42k). Have been making monthly payments since, and have dropped the balance to $22k. Do you know if the recent AmEx “late fee” settlement will affect charged-off accounts (given that half of this remaining balance is late fees and interest)? Regardless, I plan on paying until the balance is paid off, and amazingly, AmEx has left me alone, as long as the payments keep coming.

    • Charles Phelan

      October 9, 2012 at 11:49 am

      O-Man, it’s not clear yet whether or not the recent settlement between Amex and the CFPB & FDIC will affect charge-off accounts like yours. But my understanding is that Amex will have to send notices to former customers if their accounts qualify for any refund. FYI, the settlement mainly pertains to “consumers who paid old debt in response to deceptive promises to report
      payment to credit bureaus will be reimbursed the money they paid interest.” So it’s possible you might receive some relief on this account. Time will tell!

      • O-MAN

        October 9, 2012 at 9:21 pm

        Charles, thank you for the insight. I have a feeling that my query is more wishful thinking. Although, when the account went “rogue,” the interest alone was above 30%, in addition to late fees. This debt was completely my doing, not American Express’s, but I’d certainly take a reduction in the balance due. The charge-off is coming up on the seven year mark, so I wonder if it will drop off, provided I’m still paying. Any thoughts on this?

        • Charles Phelan

          October 10, 2012 at 11:50 am

          O-Man, yes, the negative mark should come off after 7.5 years from original default date.

          • O-Man

            October 10, 2012 at 9:59 pm

            Ah, that “.5” just kills me! Now, will that still drop off my credit report, even though I’m making monthly payments? I always thought I kept re-aging the account each time I paid it, thus extending the statute of limitations. Again, I plan on paying this monster off in full, just wondering what my credit report will look like after 7 POINT FIVE years. Thanks again for your expertise.

          • Charles Phelan

            October 11, 2012 at 12:33 pm

            Derogatory entries are supposed to drop off after 7.5 years. If the account is presently being reported current standing, then it will probably show as a closed but positive account. It’s probably not hurting your score all that much at this point anyway though.

          • O-Man

            October 14, 2012 at 10:08 pm

            I’m not too concerned with it, it is my “stupid tax,” and a big one at that! It’s still actively reported as a charge-off on my CR, but, aside from our mortgage, it is my only account with any sort of balance on it.

  8. Erick_me

    July 24, 2012 at 12:33 pm

    Thanks for the great advise…
    I’m in a Debt Settlement program with Freedom Financial.
    AMEX (GC Services) is telling me that they will not settle with anyone else other than directly with me. 
    Freedom Financial is telling me that they will not settle with AMEX, but with the collector. GC Services is the collector working for AMEX as I understand. I don’t know who to believe.
    If I can get the money from the account that I have with Freedom Financial, should I try to settle directly with GC Services? 
    Thanks in advance.

    • Charles Phelan

      July 24, 2012 at 1:07 pm

      Erick, it’s quite common for Amex to assign delinquent accounts to GC Services for collection, and that often happens when the account is around 90 days late. GCS will most likely have the assignment through the charge-off deadline at 6 months. Most Amex settlements do end up being negotiated via outside agencies like GCS. Yes, it is totally possible for you to negotiate with GCS on your own and reach a settlement. If FFN settles it for you, then they would be settling through GCS too, no difference there (aside from their fees). In fairness to FFN, I don’t believe for a minute that GCS would refuse to settle if FFN presents a proposal they can accept. That said, however, you *can* do the same thing on your own if you choose to.

    • Milton K

      July 24, 2012 at 5:06 pm

       Milton here from Complete Debt Solutions – What Amex are telling you is they don`t recognize this company or they have “a” history. Amex are very good with their clients. Like I said earlier if you pay it in full Amex will give your card back and if you cannot then settle with them or the agency handling the account.  So Freedom Financial are not doing their job properly, what they are doing is making you stay longer in their program and this gonna cost you a few dollars. Like Charles you can do it on your own.  So do you have many accounts with Freedom Financial?

  9. Milton Kaseke

    July 14, 2012 at 8:38 pm

    Milton here from Complete Debt Solutions, my advise to all our clients is not to settle any Amex card. Amex are the only creditor if you pay your card in full after 120, they will give your card (account) back with half of the balance, lets say your credit limit was $5000.00 and you defaulted after 3 months they will send your account to collection agencies. If you are smart try to pay it in FULL, Amex will give your card back with half the balance $2500.00 and you can work your way up. Amex have the HIGHEST standard when it comes credit rating.

    • Charles Phelan

      July 16, 2012 at 1:11 pm

      Milton, I’m surprised to hear that your firm advises all clients to never settle an Amex card. I do take your point that they are usually lenient with delinquent cardholders seeking to restore the account to good standing. And of course, there may be many situations where it makes good sense for the consumer to take the approach you recommend. But many clients want to settle ALL of their debts and not carry any balances coming out the other side. In addition, many people carry a lot of Amex debt as part of their overall mix of accounts. I don’t see it making sense, for example, to tell someone who has $10k with Amex and $20k with other creditors to keep one-third of their debt in place — that only makes the other negotiations that much more difficult, and doesn’t address a significant chunk of the debt problem itself. I believe it has to be looked at on a client by client basis, rather than taking a blanket position across the board.

  10. John

    July 8, 2012 at 2:09 pm

    The article seems to say do not try to settle with Amex if you also have a corporate amex account with your employer. Am I reading that right?

    I have a personal Amex blue card and corporate Amex green card through my employer. Does my delinquency and other negative activity affect my corporate card and get reported to my employer?

    Your help would greatly be appreciated.

    Thanks
    John

    • Steve Rhode

      July 8, 2012 at 2:32 pm

      John,

      Did your employer just hand you a card or did you have to sign an American Express agreement for the card? Many of those agreements I’ve seen require you to personally guarantee the debt.

      • John

        July 10, 2012 at 10:05 pm

        I am sure I signed something, but the corporate card is not the one I have a balance on. I don’t use the corporate card for anything other work related expense that work pays for.

        My personal Amex card is the one I owe 10,000 on. Will getting in to trouble with my personal Amex card get me into trouble at work if I have a separate corporate card through work? The article seemed to say that. I think the corporate card is owned by my employer with my name on it as stated in the article.

        Thanks,
        John

        • Charles Phelan

          July 11, 2012 at 11:53 am

          John, what I was saying in the article is that it’s unwise to attempt settlement of an Amex corporate card that was issued to you by your employer. If you are not carrying a balance on the corporate account, then the worst that could happen is closure of that corporate card due to default on the personal account. That would likely happen if you did sign a personal guarantee on the corporate card, which is probable.

  11. Ososavvy

    March 6, 2012 at 6:13 pm

    This provided some much needed advice. We were being sued and the court date was the next day. We negotiated a settlement today. We feel much better now knowing that the money is going to the original creditor and not to a collection agency. THANKS!

    • Charles

      March 6, 2012 at 6:28 pm

       Glad the information was helpful, and congratulations on your settlement success!

  12. Valerio Marjon

    September 9, 2011 at 7:07 am

    Nice article.. 
    more power..
    hamiltondebtrelief.com

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