Credit Card Debt Settlement Process: How it Works
Credit cards have become essential to our lives, and their benefits make them irresistible. Most of the population relies on these plastic cards for most purchases, and if used well, they can add to one’s savings.
However, consumers must know how the credit card settlement process impacts their credit scores and finances.
What is Credit Card Settlement?
Generally, credit card payments need to be cleared in full. Any default in payment would increase the outstanding amount and negatively impact your credit score records.
If any consumer with a credit card cannot make the total payment owed, they can contact the respective bank and indicate why they cannot pay the entire amount. They can then negotiate on the amount and reduce the outstanding balance to be cleared. This is known as credit card settlement.
The settlement amount depends on the amount owed, the individual’s repayment capacity, and their card.
Steps Involved in the Credit Card Settlement Process
A few steps must be followed to initiate a credit card debt settlement. Every lender will have different procedures for credit card settlement.
1. You have to approach your lender and explain why you cannot clear the debt on your credit card.
2. A formal letter with the reason for the inability to clear the entire credit card debt will have to be submitted. After considering your financial situation, the lender will decide on the lump sum amount.
3. Once this is done, the lender might accept or reject the settlement. Depending on your financial situation and income level, a repayment plan or a temporary forbearance agreement might be offered if they approve the settlement.
How Refunds Are Processed
Sometimes the purchases made might not match one’s requirements and need to be returned. In such scenarios, a refund gets issued to the account or credit card via which the payment was made.
The process for a refund works this way:
1. The individual places a return for the product, and it is sent to the retailer.
2. Once the retailer receives the product, the refund is initiated to the card.
3. The time required for the refund to reach the account depends on the policies of the credit card issuer and the retailer. It could vary between 7-14 days.
4. Post receipt of the refund, any rewards or points earned on the purchase would get debited.
In conclusion, consumers should know their credit card’s interest rates, fees, charges, etc., and ensure they clear their debts on time without defaulting.
Overall, consumers must learn how the credit card settlement process functions and how the returns are processed, as it will help them make well-informed decisions regarding their financial affairs.