Tips for successful negotiation of credit card debt settlement

Last Updated : July 27, 2018, 5:25 p.m.

It’s always nice to have a credit card due to the wide range of avenues that it brings from online shopping to paying your utility bills. But so often does the case of overspending arises on the lure of the plastic money. The convenience that credit card brings invariably makes an individual to splurge around. But there comes a time when it becomes difficult to cope with the bills and one starts defaulting on the payment of bills and ends up going absolutely nowhere. Have you also get caught in the credit card debt trap? Are you struggling to pay the mounting bills? Do you receive constant phone calls from the debt recovery agents to pay the bills quickly? Do you want to move away from the credit card life? But don’t know how to negotiate and settle credit card debt with the bank? Then, you must read this article and know how you can negotiate on your credit card debt.

Steps for credit card debt settlement

• Give a call to the customer care of the credit card issuing bank and request them to send all your monthly statements, including your payments till now, to your e-mail ID.
• Subsequent to receiving the statements, checking the payment details  like how much you have paid, the interest charged by the bank and the total outstanding amount so far.
• Deduct the amount paid from the total outstanding. Afterwards calculate the interest and if it seems much more than it should be. Then, you can talk to the bank for reducing it. You must take bank into confidence that you will be paying the bill. But tell them that it would be comfortable to you if the interest amount being charged gets reduced. Depending upon how strongly you put forth your words, bank can get ready to lessen the interest amount. After interest getting lessened, the resultant amount is expected to be lower and within your capacity to pay. Once the deal gets reached, the bank will issue the debt settlement letter.

How can you check the authenticity of credit card settlement letter?

There is a growing possibility of fake settlement letters being issued to you. In order to check the authenticity of the letter, please consider the below mentioned points.

• Call the bank executive to meet you and settle the due amount
• Don’t pay anything in cash while going for the settlement. Instead give a cheque or demand draft of the settlement amount. Demand draft may incur a nominal charge, which will not bother you much. Make a photocopy of the demand draft and cheque.
• Don’t get bothered by the statement of the bank executive prompting you to make the payment first and then only the settlement letter will get issued. Insist the bank executive to provide you the settlement letter at the time you are making the payment. Check the authenticity of the bank’s settlement letter by scrutinizing what is written on the same. Also, check whether the bank seal is affixed on the letter or not. In the absence of the same, you should avoid making the payment. Otherwise, hand the demand draft to the concerned banker.
• Even after receiving the settlement letter, you need to call the customer care department of the bank to get the clarification on the letter on the phone. Ask the customer care if the bank has generated any credit card settlement letter in your name. If the answer comes in affirmative, then get the reference number mentioned on the settlement letter from the customer care. Check the settlement details like amount and date of your credit card debt settlement.

Well, you can get the debt settled taking the steps advised in the article. But there are a few pitfalls associated with the move. Find out below which are those.

Long-term consequences: Settling a  credit card loan can leave reverse impact on your credit history. If the bank is not satisfied with the settlement amount, it can sue you to get the whole amount. Which could further increase your financial burden.

Impact on credit history: If you go for credit card settlement it can create negative impact on your credit history. If you will apply for any loan in future it will be marked in your report as ‘ settled’ which will create a negative impact on your credit history.

Lower the chances of getting another loan: As you have a negative credit history and most of the banks consider the credit history and credit report before lending you the loan to check your credit worthiness. A negative credit history will lower your chances of getting another loan or it will be difficult for you to convince the lender to offer you an unsecured loan. If you are in your late 50s of age, it is good option to become debt free and settle your loan before your retirement, but if you  are in your 40s of age, then you should avoid settling the loan rather make the payment by taking personal loan or borrow money from your friends or family members to make the payment against your credit card debt.

Difficulty in improving credit history: It is not easy to improve the credit history. It takes time to build a good credit history as you need to pay more attention to your outstanding and payments on time. It will take another few years for you to improve your CIBIL score and build a good credit history.

“Settled” gives wrong message: The word “Settled” gives a wrong message to the lender, when it digs your credit history. It showcases your default payments and indicates your low creditworthiness. It also gives the impression of higher risk factor with you as your credit history is not much promising.

Higher rate of interest and other charges: If any bank agrees to offer you a loan in the future, then for sure it will offer you the loan on its terms. Your chances of negotiating with bank reduces because of your defaulted credit history. In such case, banks offer you a loan on higher rate of interest with other higher charges. So, settling your debt could lead to a higher rate of interest in future for a loan.

Lower loan eligibility: When you apply for a new loan in future with a faulty credit history, there are chances that bank will offer you a loan amount lower than your eligibility or required amount. So, it reduces your chances of getting a higher loan amount be it a secured or unsecured loan.