How To Settle Credit Card Dues – Credit card settlement process? The only important thing to keep in mind about a credit card is that one should use it wisely. Think at least once before spending money with your credit card. But why?
Well, not because credit cards are “bad” financial instruments, but because they can get you a handful if you try to use them too much.
The habit of using a credit card is such that you can take more credit leeway than you should. From one purchase to another, credit cards allow you to buy anything you want, but at what cost? It’s important to understand that whatever you buy with your credit card today, you’ll have to pay tomorrow. And if you go beyond your income, you can fall prey to massive debt, which ends up being hard to pay on a day-to-day basis.
Not only the cumulative amount spent but also the amount of interest applied to your unpaid balances will get you in big trouble. Therefore, it is better to use this financial instrument wisely than to regret it later. Here are some details on why it’s as important as it sounds!
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What Does A Credit Card Statement Mean?
Credit card payout is a mutual agreement between the credit card holder and the bank/credit card issuer that assists the credit card holder when it becomes too difficult to track payments from the credit card. This can be for a variety of reasons, from real financial emergencies to reckless credit card spending. Nevertheless, the conclusion places too great a burden on the credit card holder and causes a severe financial strain as the debt mounts every month and there seems to be no way out.
In such financial panic situations, banks/debt settlement agencies propose an arrangement between the credit card issuer and the credit card holder. In such cases, the credit card holder is advised to opt for a surrender fee in exchange for a full waiver or to immediately request a settlement.
It should be noted that credit card settlement is performed in extremely rare cases and credit card issuers do not encourage this as an option for debtors. There is a minimal chance that credit card issuers will pay unless you make a balloon payment. The credit card payout percentage also depends on the credit card issuer and their ability to negotiate the amount.
Does credit card payout affect credit score?
Since credit card payouts indicate your irresponsible financial behavior and inability to manage/repay your credits, it is just as bad for your credit score as financial bankruptcy. Paying off credit cards drastically lowers your credit score and therefore almost eliminates your chances of getting any kind of credit shortly. It may take several years to recover from your credit card bill. This is also mainly because a credit card payout is recorded as a black spot on your credit history lasting up to a minimum of 7 years.
How Do You Go To Credit Card Settlement – Credit Card Settlement Process?
You can initiate a credit card settlement by following these Credit card settlement process steps:
- Visit a debt brokerage agency or contact your credit card company
- Briefly explain that you cannot pay your credit card bills in a credit card settlement letter
- Also, state in your letter that you are open to other payment terms.
- You can then offer a balloon payment to your credit card company or else file for bankruptcy.
- Your issuer can accept or decline your credit card bill. If approved, you may be offered a payment plan based on your current income
Credit Card Settlement: A Good Thing or a Bad Thing?
Filing for bankruptcy is probably the last thing you want to do in your life. Credit card bills are no less. While such deals may seem like a last resort in case you have incurred a major financial burden, you should try to avoid them as much as possible due to their drastic impact on your credit score. So even if you opt for such an arrangement, do your best to negotiate with the credit card company yourself so that you can avoid the costs associated with hiring a debt brokerage firm.
Alternative Credit Card Billing Options
If you still think there’s a slim chance that your credit card payments won’t be made, you should try one of these options:
Credit card balance transfer
If you have too much outstanding balance on one credit card, you can choose to transfer your balance from one credit card to another. This helps if the other credit card has a lower or zero interest rate on the unpaid amount for a predetermined period (up to 3 months, in most cases). Credit card issuers offer this option and only charge interest after this predetermined interest-free period. Therefore, this option is only suitable for credit card holders who can pay their bills within the predetermined time period offered by the other credit card issuer. Alternatively, for those unable to pay their bills within the specified time period, some credit card issuers offer users the option to convert their transferred balance into EMI.
Look for alternative credit sources
If the credit card debt becomes too much for you to pay off in the given period, you can borrow credit from another source to pay off your credit card bills. You can take out a personal loan from a bank, get an additional home loan or get a gold loan to get out of the credit card debt trap. You can also apply for a personal loan. This would be useful because the interest on the amount borrowed from these sources is relatively lower and you get extra time to pay off your instalments.
How do stay away from such situations?
Follow these instructions to avoid getting into situations that might prompt you to opt for credit card payments.
- Sign up for the automatic payment feature on your credit card mobile app/online portal
- Set timely reminders for your due dates
- Pay early – Don’t wait until the last minute to pay off your overdue credit card
- If you are short on money, at least pay the minimum amount due before the last date. The remaining balance can be paid in the period without interest
- You can take out a personal loan if you have reached a stage where you can no longer pay your credit card dues because these loans have a lower interest rate.
- You can ask your bank to convert your outstanding balance into easy and affordable EMIs, which you can pay over some time
- Alternatively, you can also transfer your credit card balance to another bank account and pay the amount through regular EMI
Is credit card payment a good idea?
In general, you are advised to avoid credit card payouts because of their impact on your credit score. However, depending on your current situation, you may have no choice but to settle. For this reason, it is important to know how to negotiate your credit card debt settlement yourself as it will allow you to get closer to the issuer and avoid the costs associated with hiring a debt brokerage firm.
The bottom line is that to avoid having to settle, make sure you spend only what you can afford on your credit card and pay bills on time. Choose a credit card company that allows you to make payments through multiple payment gateways to simplify your payment.
How To Settle Credit Card Dues – Conclusion:
All in all, it’s best to avoid ending up in a situation where you have the slightest chance of not being able to pay your credit card bills. It is better not to land in such situations than to suffer later. Try to use your credit card as little as possible. Even if you use it quite often, make sure your monthly credit card bill doesn’t exceed your monthly income. Make sure you only spend what you can afford and continue to pay your bills on time to maintain good financial health.