Credit card has become a very useful financial tool in today’s time. Not only can shopping and payment be done easily, but it also helps a lot in emergencies. But when it is used without planning and beyond limits, it can turn into a huge debt. Many times, people are unable to pay the credit card bill and become victims of mental, financial stress.
In today’s article, we have learned through the true story of Rajesh how a common man, who used to pay his credit card on time, suddenly got into debt due to losing his job. In a few months, he owed lakhs and started breaking down due to recovery calls from banks. But he did not give up. He contacted the bank, told his situation honestly and opted for credit card settlement.
Due to Rajesh’s wisdom and the right steps, the bank reduced his amount, and he was able to get rid of the debt by paying a certain amount. Although his CIBIL score fell due to this, he got mental relief and also a chance for a new beginning.
In today’s time, credit card has become an important part of our life. Whenever we need money, we use credit card without hesitation. In the beginning, it seems very easy – need something? Just swipe and pay it next month. But have you ever thought what will happen if this payment is not made on time?
This is the story of millions of people who gradually get trapped in the trap of credit ccards In the beginning, the expenditure is only Rs 5,000 or 10,000, but when interest is added, late fees are charged, and minimum amount has to be paid again and again, then this debt turns into lakhs. And then a word comes into the picture – “Credit Card Settlement“.
Many people do not know that when they are unable to pay their credit card, they have only one way left – settlement. But this way is not easy. In this, you have to talk to the bank, bargain for the amount offered by them, and sometimes you have to take the risk of spoiling your credit history.
In today’s article, we will tell you what credit card settlement is, how it can be done, what the risks in it, and what the benefits can be. We will explain to you through a true story how a common man got out of this trap. If you are also burdened with a credit card at this time, then this article can become a ray of hope for you.
Credit Card Settlement is a process in which you negotiate with your creditor to forgive a part of the outstanding amount on your credit card by making a lump sum payment. It is an agreement that you make with your card issuer as a last resort when you see that your credit card debt is increasing.
This can happen due to many reasons, ranging from unnecessary spending to careless spending habits. When your debt increases, the interest on it also increases, which can make it difficult for you to repay the outstanding amount. If you do not see any way out of this, then you can recommend a Card Settlement.
The following are some of its main features:
Below are some common reasons:
In this article, we will tell you through a true story how credit card settlement is possible, and how a common man got rid of a debt of lakhs with his courage and wisdom.
This is the story of Rajesh Verma (name changed), who was a marketing manager in a private company in Delhi. His monthly salary was ₹45,000. Rajesh loved the convenience of credit cards — he used to pay EMIs on time, shop regularly, and also avail reward points. At some point, he took three credit cards, whose total limit was more than ₹2 lakh.
Rajesh believed that as long as he kept paying EMIs on time, there would be no problem. But in the year 2020, he lost his job during the pandemic. He thought that he would get another job soon, but months passed and jobs did not come. Meanwhile, he started finding it difficult to pay the minimum amount on his credit card. The interest kept adding up, and the debt kept increasing.
Debt burden and stress
Within six months, Rajesh had a debt of more than ₹1.8 lakh. Phone calls from banks, notices, calls from recovery agents – all of this started breaking him mentally. He did not know how to get out of this.
Wise decision – the path of settlement
One day, a friend of his told him about “credit card settlement”. Rajesh himself contacted the bank and explained his financial situation with utmost honesty. After several discussions and documents, the bank offered him a settlement of ₹1.05 lakh instead of ₹1.8 lakh – provided he paid the amount within 60 days.
Rajesh raised this amount by mortgaging some of his jewellery, borrowing some money and saving some money and paid it to the bank. The bank also gave him a settlement letter, which proved to be legally necessary in the future.
The whole process may have dropped Rajesh’s CIBIL score, but he got a big relief – relief from mental stress, an end to extortion calls, and a chance to start afresh. He resolved to never borrow money or misuse credit cards again.
If, for some reason, you are not able to pay your credit card in full, then a Credit Card Settlement can be an option. In this, the bank or loan-giving institution (NBFC) settles your outstanding loan for a certain amount by giving a discount. But to complete this process, you have to submit some important documents.
Documents required for Credit Card Settlement:
1. Identity Proof
2. Address Proof
3. Income Proof
4. Loan Agreement
This is the document issued by the bank or NBFC at the time of giving the loan. It contains the details of the loan terms and your outstanding amount.
5. CIBIL Report
During a Credit Card Settlement, the bank checks your CIBIL score, which gives them information about your credit history. This report shows your credit behavior and current loan status.
6. Settlement Request Letter
If you want to get a Credit Card Settlement done, then you will have to give a written request letter to the bank, in which you will tell about your current financial situation and the need for settlement.
Below are some steps that should be followed before a credit card settlement:
The process of Credit Card Settlement is explained below in simple terms:
A settlement can hurt your credit score. The impact can be seen in the following ways:
It has many benefits, which are as follows:
It has many disadvantages, which are as follows:
This true story teaches us a very important lesson – no matter how big the problems in life are, if we act with courage and wisdom, we can get out of them. Rajesh’s story is the story of millions of people who initially use credit cards only to meet their needs, but gradually start spending without thinking, and then one day get buried under the burden of debt.
A credit card is a very convenient tool, but it is good only as long as you use it carefully. As soon as you are unable to pay on time, it can become a big problem for you. This problem becomes more serious, especially when you lose your job, there is a family emergency, or your income suddenly stops.
Rajesh showed that when the situation is difficult, one should look for a solution instead of getting scared. He admitted his mistake, spoke directly to the bank instead of getting scared, and wisely adopted the thing that people run away from – i.,e. credit card settlement. He also learned that although the credit score does get affected after settlement, it can be improved with time.
Que: Can the credit card be reused once a settlement is done?
Ans: Not generally. Once a settlement is done, the bank freezes the credit card, and it can be challenging to obtain a new credit card from the same bank in the future.
Que: Can the bank appoint a recovery agent after the settlement?
Ans: If you have strictly adhered to the terms of settlement and received a No Dues Certificate from the bank, then the recovery agent or bank cannot harass you.
Que: Can the CIBIL score increase again after settlement?
Ans: Yes, but it will take time. Pay on time regularly, borrow small amounts and pay them promptly, and check your credit report so that the score improves over time.
Que: Is Credit Card Settlement illegal?
Ans: No, a settlement is not illegal, but it is indicated as a “Settled” status in your credit report, which affects your credit history.
Que: Is it better to go for the EMI option instead of the settlement?
Ans: Yes, if possible, it is better to go for the EMI option and pay the entire amount in installments, as it will not affect your CIBIL score, and it will be convenient to take a loan or credit card in the future.
Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
