Know Credit Card Settlement Process

Do you habitually use the entire Credit Card limit and only make minimum payments? You can soon find yourself struggling with significant with Credit Card debt and Credit Card settlement might be the only way out in some cases. Here's what you need to know about Credit Card settlement.

Credit Card debt settlement is a facility users can opt for when they're finding it difficult to clear the outstanding card debt. As the outstanding dues will only keep mounting every month, a settlement could come in handy for settling the dues for good.

During a settlement, the card issuer agrees to let go of a portion of the outstanding debt if the cardholder settles the outstanding debt as a one-time lump-sum payment.

Building a high credit score requires you to use credit-based products like Credit Cards and Loans responsibly. You should repay the Credit Card dues and Loan EMIs on time to improve your score.

But if you don't clear the outstanding dues and opt for settling Credit Card debt, the card provider will apply a penalty to your account. The penalty information will also be sent to credit bureaus like CIBIL, and your credit score will be adjusted accordingly. Thus, you should only use the settlement facility when all the other repayment options are exhausted.

Here's a quick overview of the Credit Card debt settlement process-

• Contact your Card provider and request a settlement
• Explain the reason why you're unable to clear the entire outstanding debt
• Based on your situation, the Card provider might agree to a settlement
• Alternatively, you might also be provided an option to get the payment rescheduled
• If you opt for settlement, pay the outstanding amount as per the terms and conditions of the Card provider to close the account

As mentioned above, Credit Card settlement negatively impacts your Credit Score. While you can opt for the settlement facility if you're out of options, it is best to avoid getting into this situation by not going overboard with Credit Card debt and paying the outstanding dues on time.

Here are some other ways to repay the outstanding Credit Card debt-

• Use a Personal Loan to clear the Credit Card dues
• If the interest rate is very high, consider the balance transfer option to switch to another Card provider
• Redeem your investments in Mutual Funds, Stocks, FDs, etc., to repay the debt

The Credit Card settlement process allows you to get some concession on the outstanding Credit Card dues if you agree to repay the entire debt amount at once. However, a settlement also negatively impacts your credit score. Thus, it is always better to use the Credit Card according to your finances and avoid using the entire credit limit.

AU Small Finance Bank offers a wide range of Credit Cards with exclusive features, allowing you to choose Cards according to your spending habits and lifestyle.

Read More: How to Apply for Credit Card Online?