Credit Card Settlement

Often people end up borrowing more than they can pay back. Or the vicissitudes of life intervene to upset the carefully laid-out plans we have made. Either way, it is likely that you may find yourself in a situation where you have maxed out your credit card limits and you find your bills ballooning so fast that you wonder how you will ever be able to settle your credit card debt? Read on to find out what options you may have if you ever find yourself in such a situation.

What is a Credit Card Settlement?

Credit card settlement is a mechanism wherein your lender is willing to write off a portion of your debt in return for a commitment on your part to repay the balance. Needless to say, it is a measure to be adopted only as a last resort. Banks and financial institutions in the business of lending do not offer credit card debt settlement to every lender that is facing difficulty in credit card bill settlement. However, in exceptional circumstances, they may consider the option of salvaging at least some portion of their capital rather than see all of it turn into bad debt.

Does Credit card settlement Hurt Your Credit Score?

Yes, it does. In fact, opting for a credit settlement is one of the biggest black marks on your credit history. It can take many years for your credit score to recover from the blow. This is because the lender needs to impose some kind of penalty for the default so that borrowers learn to inculcate greater financial discipline in repaying their borrowings. This is the reason you should only opt for credit card settlement as a last resort. It would be better for you to first consider other modes of payment such as digging into your savings or seeking help from family and friends. Only when all other means have been exhausted should one opt for credit card settlement.

What is the Credit card settlement Process?

To initiate a credit card settlement, follow these steps:

1. Call your bank and borrower or visit them in person and explain your circumstances. You may be required to speak to multiple officials before a credit card bill settlement is agreed upon.

2. Apply for a settlement via a credit card settlement letter that explains your inability to further service your debt. Depending upon the severity of your circumstances, the lender may arrive at a lump sum figure for the settlement.

3. Offer the lump sum as part of the credit card debt settlement process. In some cases, the issuer may reschedule your debt to waive off interest instead of accepting a lump sum. The exact mode of settlement depends on the judgment of the lender.

Is Credit card settlement a Good Idea?

Credit card settlement is akin to filing for bankruptcy, which means it is a measure of last resort. Your credit score will be hit hard and you will not be able to borrow money from a lending institution for some time. It is better to avoid getting into a situation where you have to negotiate a credit card settlement with the lender. Never borrow more than you can repay and always pay your credit card bills on time. Choose a credit card that allows you the option of paying your bills through multiple payment methods such as the RBL Bank Supercard offered by Finserv MARKETS. The RBL Bank Supercard offers you a choice of paying through 6 different payment options including a one-tap payment method via the RBL mycard app. This ensures that you never fall behind on your credit card payments. On top of this, you get reward points of up to Rs. 55,000 that maximize your savings. Apply for credit card, if you don’t already have one!

Frequently Asked Questions About Credit Card Settlements

  • ✔️How does a credit card settlement affect your credit score?

    A credit card settlement can have a negative impact on your credit score. Your credit score is a measure of your ability to pay back loans. When you back your instalments on time, it remains healthy. When you default on your payments, it goes down.

  • ✔️What is the credit card settlement process?

    To apply for a credit card settlement, visit your lender and explain your circumstances. Fill out a credit card settlement letter mentioning your willingness to pay a lump sum for the settlement. The final decision depends on the lender.

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

    No, you may not be allowed to use your credit card to make the credit card settlement.

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