Credit Card Settlement Process: Know How it Works

As of May 2019, India had as many as 4.89 Crore credit cards issued by multiple financial institutions. With attractive features and benefits, these credit instruments have found favour among individuals belonging to the salaried and self-employed groups.

The ever-increasing popularity of credit cards, however, comes with a responsibility that cardholders need to fulfil like timely bill payments. Nevertheless, with the increased purchasing power, limiting the spends have become challenging. It often leads to the accumulated outstanding debts. In such cases, credit card settlement is the way forward.

Know what this settlement entails

Credit cards come with interest-free periods of credit utilisation along with the total amount due and the minimum amount due. While it offers flexibility to pay the bill at your convenience, payment of only the minimum amount due causes the remaining amount to be carried forward to the next billing cycle.

Other actions like a sudden requirement of emergency finance can also add up to the bill amount. These actions lead to the piling up of dues, which may pose a significant burden on your finances. In such cases, one has an option to go for the settlement of credit card for self-employed as well as salaried individuals. With this option, you may pay a lump sum amount and receive a waiver on the remaining due.

However, it should be considered the last resort to dues settlement because it leaves a negative impact on your credit history. Instead, you may plan to use your credit card wisely and pay your bill within the due date in full amount.

The process of credit card dues settlement:

You may proceed with credit card settlement through the following process.

  • Approach your card issuer or an agency involved in debt settlement.
  • Provide reasons that support your settlement request along with a settlement letter. Make sure to mention that you are open to negotiations of repayment terms.
  • Mention the lump sum amount you are ready to pay towards this settlement.

The decision to accept or reject this request remains at the card issuer’s discretion. Once the lender agrees to this settlement, you will receive an offer with a repayment plan depending on your income and other considerations. You may also receive a temporary agreement of forbearance that would extend the repayment period. With the available time, you may plan your finances and pay the dues. Apart from the process, it is also essential to know how it affects your credit score.

Know how the settlement affects your credit score:

As credit card settlement is initiated by individuals who are unable to pay the dues, it affects their credit score negatively. The impact can be as drastic as the one resulting through the filing of bankruptcy. As it remains for as long as seven years in your repayment history, you will resultantly find it difficult to avail any other loans or advances.

The alternative solution for this can be initiated in two ways, i.e., plan your expenses and repayments or avail a credit card that comes with flexible repayment options.

While the former entirely depends on your funding requirements and availability, for the latter you may look out for options like effortless conversion to EMIs, interest-free personal loans up to 90 days, etc.

Credit card for self employed and salaried persons like Bajaj Finserv RBL Bank SuperCard is available with such beneficial features. Other benefits to look for include interest-free ATM withdrawal, rewards, savings and other benefits.

They also bring pre-approved offers on credit cards that make the finance availing process convenient and hassle-free. These offers are available on several financial products including home loans, personal loans and business loans. To check your pre-approved offer, all you need to do is provide a few necessary details like name and contact number.

With these considerations in mind, choose the right card from the available types of credit cards and maximise the benefits they bring. Once you select the suitable one, you may proceed to apply for a credit card online for instant approval.

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