Credit cards, when used wisely, work in favour of your finances. To ensure maximum benefits, you must ensure that your credit card usage ties in with what you can afford. This can be hard to resist, given that credit cards boost your purchasing power and also give you access to a whole range of benefits. Depending on the issuer, you may get interest-free borrowing periods, access to unique amenities and so on. However, if you find significant outstanding debt, consider credit card settlement as a last-resort measure.
Read on to know more.
What is a credit card settlement
A settlement is a tactic you can employ when it is challenging to keep up with your credit card dues. This can happen because of a sudden emergency that requires ample financing for a long time or reckless spending. Whatever the reason, the main issue at hand is that your credit card dues will multiply every month and cause severe financial stress. In such a situation, it’s considered a settlement offered by both banks and debt settlement agencies.
Here, you may be advised to either set aside a lump sum and offer it in exchange for a complete waiver or directly appeal for a settlement. Credit card payment settlements are only done in extremely rare cases, and issuers do not encourage it. You should consider a settlement as a last resort, and even then, there is a meagre chance that the issuer will agree to it without you making a lump sum payment. The credit card settlement percentage depends on the issuer and your ability to negotiate.
Does the credit card settlement process affect your credit rating
Credit card debt settlements hurt your credit score almost as much as filing for bankruptcy does. These settlements severely damage your score, and it can take several years to recover from it. This is mainly because your credit history records a settlement as a black mark that can last up to 7 years and hamper subsequent loan applications.
Additional Read: How to increase your credit card cibil score?
What is the credit card settlement process
Given below is the process to initiate credit card settlements.
- Visit the issuer or a debt settlement agency
- Explain your inability to make payments via a credit card settlement letter and mention that you’re open to negotiating other repayment terms
- Offer a lump sum or inform the issuer of your plans to file for bankruptcy
Following these steps, the issuer may either deny or approve a settlement. If approved, the issuer may offer a repayment plan based on your current income or grant you a temporary forbearance agreement.
Additional Read: Credit card without income
Is credit card settlement a good idea
Typically, you’re advised to avoid credit card settlements because of their impact on your credit score. However, depending on your current situation, you may have no other choice but to settle. For this reason, it is important to know how to negotiate credit card debt settlement yourself, as it allows you to approach the issuer and avoids the fees associated with hiring a debt settlement agency.
The bottom line is that to avoid a situation where you need to resort to a settlement, ensure that you spend only what you can afford via your credit card and clear bills on time. Opt for a credit card issuer that allows you to make payments via multiple payment gateways to simplify the latter. The Bajaj Finserv RBL Bank SuperCard is one such option as you can pay using any of the six payment options. Among them is the RBL MyCard app that allows you to pay your bill in just a few taps. Use this feature to ensure that you never miss a credit card payment.
The SuperCard also allows you to benefit from various credit card offers on lifestyle, entertainment and utility purchases. Additionally, you earn reward points on every transaction, facilitating greater savings of up to Rs. 55,000 per year. To avail of all these benefits and more instantly, all you need to do is check your pre-approved offer online. Apply using a customised credit card offering and get quick approval.
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