Credit Card Settlement

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What is Credit Card Settlement?

The process of proposing to pay back half of your credit card debt in one lump sum to your creditor, and the proposal getting accepted by a creditor, is called credit card settlement. There might be multiple reasons to do so, from financial emergencies to budget constraints. However, the practice of credit card debt settlement is extremely rare, and credit card issuers do not encourage debtors to opt for it as an option.

Does Credit Card Settlement Hurt Your Credit Score?

Since credit card settlements are indicative of irresponsible financial behavior and an inability to repay your debts, it is equally damaging to your credit score. Additionally, getting your credit score back on track might take some time after a major setback. Hence, it is advisable to consider other modes of assistance in settling your bills before you opt for a settlement in credit card.

What is the Credit Card Settlement Process?

Here are the steps to follow if you wish to begin a credit card settlement process:

· Reach out to a settlement agency or the credit card issuer and explain your inability to repay your credit card bill. This step may require one to negotiate with multiple parties before a credit card payment settlement is offered

· Next, the cardholder needs to offer a lump sum figure or file for bankruptcy, and depending upon the situation the issuer and debtor can arrive at a lump sum figure for settling credit card debt

· As a part of the process, the issuer can also reschedule the settlement of credit card payment to waive off the interest or accept the lump sum amount depending upon their judgment

Is Credit Card Settlement a Good Idea?

Credit card debt settlement is never a good choice as it can severely impact your credit score, and it is similar to declaring bankruptcy. It is, therefore, advisable to avoid a situation where you have to resort to negotiating a credit card settlement. Even if you have to pick a settlement option, it is best to learn to negotiate with the issuer as it can help in avoiding debt settlement agency fees.

Other Ways to Resolve Credit Card Debt

It is wise to try either of these options if you still believe you have a slim chance of escaping credit card settlement:

· It is advisable to take a personal loan or even opt for a gold loan as long as you have enough to repay your debt

· One can also liquidate their investments such as Fixed Deposits, bonds, shares, etc.

· The cardholder can also choose to transfer the balance from one credit card to another. This will help if the other credit card has a lower rate of interest on the unpaid amount for a preset tenure

FAQs about Credit Card Settlement

  • ✔️Can I make a settlement with my credit card?

    Yes, you can make a credit card settlement as long as the bank or financial institution agrees to accept a lump sum amount rather than turn the entire amount into bad debt.

  • ✔️What percentage will credit cards settle for?

    Depending on various factors, the percentage of debt typically varies from 30% to 80%.