Credit cards outstanding in India was around Rs.92,900 crore in May and April 2020. It not only represents how Indians have embraced credit card usage but is also insightful of the fact that many of these users do not service credit card dues in time. With each passing month of credit card delinquency, these debts tend to pile up, increasing the financial burden on users. The post is going to elaborate here that how credit card debt settlement helps in this.

Opting for credit card settlement is thus a unique solution when you have accumulated substantial debts and do not have a suitable plan of repayment. Settling the dues with your card provider can waive off your liabilities immediately. Nevertheless, companies choose to offer settlement opportunities in rare cases only. Still, understanding what it entails is beneficial to cardholders during situations that offer no other recourse.

What is a credit card debt settlement?

Credit card settlement refers to a specialized tactic of dealing with the ever-mounting debt on your card. The reason for this immense outstanding sum can be due to a sudden big-ticket emergency expense or due to improper handling of dues. Regardless, when such a thing happens, the primary concern is servicing the entirety of the dues as soon as possible. Delaying payments can result in fresh interest charges every month. 

Unfortunately, credit card settlement is reserved for the rarest of cases. In such a situation, cardholders will need to set aside a lump sum amount or the financial institution may waive-off the entire due, as per the case. If you are currently struggling to keep up with such dues, you should learn how to use a credit card wisely to avoid such situations in the future as it is not advisable due to a lingering negative impact left on the credit profile.

How to initiate a credit card settlement?

Credit card settlement should be the last course of action when struggling with accumulated debts. Individuals should try other avenues first to service the outstanding dues. Remember that settling can harm your credit ratings substantially. Filing for bankruptcy and credit card debt settlement has similar adverse effects on your credit scores.

Still, if you need to settle the dues with your card provider, the steps mentioned below would help – 

  • Step 1: Visit the credit card issuer’s offices.
  • Step 2: Convince the financial institution about your inability to service the dues as it stands now. You can negotiate about acquiring better offers, such as reduced interest rates. It is the most crucial step of the process since it depends on one’s negotiating abilities. If the card issuer is sympathetic to your situation, you can move forward with the settlement terms.
  • Step 3: You can either pay a lump sum amount to waive off the additional debt or inform your credit card issuer about an impending bankruptcy filing.

After following these steps, the card provider may accept or reject your settlement request. In case of approval, the financial institution will chart a course on how you can repay your credit card debt with relaxed terms. Alternatively, the company may also extend a temporary forbearance agreement, which frees you from paying the sum for a predetermined period.

Long-term effects of credit card settlement

While such a settlement can seem like the most beneficial option at present, doing so can leave a long-standing impact on your ability to avail credit in the future. Such settlement leads to a remarkable negative effect on your credit score and history. Since most NBFCs require individuals to carry a score of 750 or more to avail a loan or any other form of credit, such deals can disqualify you from opting for these advances.

Knowing how to choose the right credit card can often reduce your liabilities. Some cards offer accelerated reward point earnings, only increasing a user’s ability to save on daily expenses. 

The SuperCard, for instance, is one such premium credit card. It comes with accelerated reward point earnings, along with other features such as interest-free cash withdrawal, easy Emi conversion, etc.

The company also provides pre-approved offers to simplify and accelerate the credit availing process. These offers are available on a range of financial products, including personal loans, business loans, and credit cards. You can check your pre-approved offer by submitting a few important details. Nevertheless, it is best to try avoiding credit card settlement at all cost due to its impacts that can be easily avoided. If you cannot afford to service card bills, opting for a virtual credit card can also help. These cards with one-time usage can help limit your expenses, especially if you tend to spend more online.