Fred took a different approach to paying off his credit cards. He deliberately missed a couple of payments, then called the credit card companies and asked them to slash his balances.

Bank of America, Discover and Citibank all agreed, offering settlements from 40 cents to 60 cents on the dollar. No arguing, no fighting, no asking to speak to a manager.

"They gave it up before I asked," says Fred, who asked us not to use his real name so this wouldn't become part of his Google legacy.

This might sound preposterous given how the credit card industry has been treating its customers since the financial crisis struck -- raising interest rates, slashing credit limits and even canceling the cards of customers in good standing.

But with 6.5% of all accounts at least 30 days late, it looks like banks are quietly trying to keep the recession from turning credit card defaults into the next mortgage mess.

Debt settlement is nothing new.

Reputable credit counselors routinely negotiate "debt management plans" with the credit card companies. That writes off about half of a creditor's debt and establishes a realistic 36-to-60-month repayment schedule to retire the balance.

But everything we're seeing and hearing indicates there's a sudden willingness on the part of credit card companies to strike such deals directly with their customers.

Customer service representatives have been empowered to settle debts, and we've even heard that some cards are calling delinquent customers and offering to cut their debt in half if they'll pay up.

These deals usually require cardholders to pay the remaining balance immediately. At most they're given a couple of months to come up with the money.

The banks are being cagey on exactly who qualifies for such a settlement and how much debt they're willing to forgive. But the American Bankers Association, their trade organization, confirms the general trend.

Getting 50% from a delinquent account is better than nothing.

It's also more profitable than trying to sell that debt to a collection agency, which might only pay five cents on the dollar.

Banks used to get 10 cents or 15 cents on the dollar for bad credit card debt. But collection agencies are paying less because consumers have less to pay the debt collectors.

But that doesn't mean you should just stop paying your credit cards with the intention of seeking a debt settlement in a few months.

"You'd be turning yourself into a financial mess to save a little bit of money," says Avi Karnani, co-founder of Thrive, a money management Web site. "It's going to cost you much more money over the course of your life."

We asked Fred about what this did to his credit score, and his reply was "not sure, don't care." That's not the best route to go, though.

Debt settlements are always reported to the major credit agencies and remain on your credit reports for seven years. That will significantly lower your credit score, making it more difficult to get a mortgage, car loan, or even a job.

Sure, you could save money now, but when the only loans you can get are for sky-high interest rates, or you don't get a job because you defaulted on your credit cards, you could lose much more in the long run.

So what's the best thing to do?

Before asking your credit cards for a settlement, seek the help of reputable credit counselors who belong to the National Foundation for Credit Counseling.

They can evaluate your finances and figure out the best way for dealing with your debts while causing the least possible damage to your credit report.

Whatever you do, don't hire any of the debt counselors or debt settlement companies that advertise on television. They charge enormous amounts for their services and often don't deliver on their promises.

Our 5 red flags for spotting bad credit counselors can help.

By Jen A. Miller

Interest.com Contributing Editor