Credit Card Settlement

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What is the Process of 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. You may want to do so for multiple reasons, which can be: 


  • Financial emergencies

  • Budget constraints 

  • Poor financial planning

Do note that this provision isn’t something that is easily offered by issuers. It is rarely opted for, and many experts do not recommend it as it affects your financial standing. So, it helps to know how to settle credit card debt in other ways as well. 

How Does the Credit Card Settlement Process Work?

You can begin the credit card settlement process with ease. Here are the easy steps to follow:


  • Reach out to your 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 judgement.

Does Credit Card Settlement Hurt Your Credit Score? 

In general, credit card settlements suggest that you have not managed debt responsibly. As such, it has a negative impact on your credit score and will get reflected in your report. 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.

Credit Card Settlement – is it a Good or a Bad Thing to Do?

Credit card debt settlement is never a good choice as it can severely impact your credit score, and it is similar to declaring bankruptcy. As such, you should try all available options to avoid resorting to a credit card settlement. In instances where you have no other option, try to negotiate with the card issuer instead of an independent credit card settlement agency. This can help keep fees and charges minimal.  

FAQs on Credit Card Settlement

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

    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?

    The credit card settlement percentage varies based on several factors. Based on these, it can range from 30% to 80%.

  • ✔️Is settlement good for credit card users?

    It is commonly recommended to avoid credit card settlements as it can have a negative impact on your credit score.

  • ✔️How do I settle my credit card payment?

    Banks/debt settlement agencies will first propose a settlement between you, the credit card holder, and the credit card issuer. Depending on the case, you may be advised to pay a lump sum in exchange for a waiver. In other cases, you may be offered a settlement outright.

  • ✔️What is the minimum amount for credit card settlement?

    Typically, the minimum amount for credit card settlement is calculated at 5% of the total outstanding amount.