What is the credit card settlement process?

Credit cards are extremely useful, and their benefits are there for all to see. For instance, if you look at the wide range of features of the Airtel Axis Bank credit card, you will immediately want to get your hands on one. 

However, remember that you should only use your credit card to the point where you can pay it back. While repaying the minimum amount due is always encouraged, there can be times of extreme financial distress when you might not be able to pay back the minimum amount as well. In such cases, you can go for the credit card settlement process

Do remember that the credit card settlement process is a last-resort tactic only.

What does credit card settlement mean?

Credit card settlement is a process in which a borrower and a creditor agree on a reduced balance that the borrower will pay (in full) in exchange for the creditor releasing the borrower from the debt. This can be an option if you are unable to pay the full balance on your credit card debt and are struggling to make the minimum monthly payments.

How to negotiate for credit card settlement?

There are a few different ways to negotiate a credit card settlement. One option is to contact the creditor directly and try to negotiate a settlement amount that is lower than the outstanding balance on the credit card. This can be done by explaining your financial situation and offering a lump sum payment that is lower than the outstanding balance. 

Another option is to work with a debt settlement company, which will negotiate on your behalf to try to reach a settlement agreement with the creditor. You can also offer a lump sum or inform the lender that you plan on filing for bankruptcy.

It is important to note that the credit card lender may or may not agree to a settlement. If it is approved, the lender might offer a more lenient repayment plan based on your current income. In addition, you should also keep in mind that a credit card settlement may have negative consequences on your credit score as it is considered a sign of financial distress and will be reported to the credit bureaus. 

Furthermore, you might have to offer a large percentage of the outstanding balance to convince the creditor to agree to a settlement.

Is credit card settlement a good idea?

In ideal cases, it is always advised to not go down the path of credit card settlement because of the adverse effect on your credit score. However, in times of extreme financial distress, there might be no better way than this. It is also a good idea to approach the credit card issuer directly for the negotiation rather than hiring a debt settlement agency. Hiring the agency also means you must pay them and that is an additional financial burden.

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