Credit cards are essential financial tools that bring along several additional advantages alongside providing immediate financing to users. For instance, such a card improves one’s purchasing power and also enables the user to earn reward points with each purchase. These reward points can then be redeemed to enjoy savings on future purchases. Further, credit cards can also be used to build up a favorable credit history.
However, these advantages can only be availed if one uses his/her credit card wisely. In case of irresponsible credit behavior such as late payments, exceeding the credit limit to make purchases, etc. can lead to accumulation of credit card debt. In such cases, a significant number of individuals opt for credit card settlement. While it is one of the available options to pay off the piling debt, it is not the best way forward.
Further, there are also a few myths associated with credit card debt settlement. These have been explained below to help you make a suitable decision regarding your card’s debt payment –
Myth 1: Negotiations can be carried out only by debt settlement companies
While in most cases negotiations are carried out by debt settlement companies, individuals can also get in touch with their financial institution regarding their debt management plan in case of piling up card dues. It includes negotiating regarding interest rates as well as other terms and conditions of payment.
Myth 2: Debt settlement will help with credit score improvement
The notion is entirely untrue since credit card settlement negatively impacts an individual’s credit score instead of improving it. This is because when the issuers agree to debt settlement, they are settling for a lesser amount than what was initially owed to them, signifying limited repayment capacity.
Furthermore, when an individual enters into a debt settlement agreement, it is recorded in his/her credit history and remains for around 7 years denting the score for the long term. During this time, if an individual applies for a loan, he/she will likely be rejected since debt settlement is viewed as a negative mark.
Myth 3: Settlement is the only way to deal with credit card debt
It is another common myth associated with credit card settlement, which is why most individuals opt for this method once they find it difficult to make payments.
On the other hand, there are several ways that one can opt to pay off the loan amount. Consequently, Individuals should always conduct thorough research and as such, should only opt for debt settlement as a last resort.
For instance, Individuals should consider opting for credit cards that allow users to convert the outstanding amount into affordable monthly installments and pay it off over a tenure of up to 3 months alongside ensuring easy credit card bill payment.
Card users who wish to convert their outstanding amount into monthly installments can do so by getting in touch with their credit card issuer. It can be quickly done by placing a call or via online request submission.
However, there may be some requirements placed by the credit card company regarding the outstanding balance to be converted into EMIs. Hence, one should check with his/her financial institution to avoid complications later on.
In addition to that, leading credit card providers such as Bajaj Fisnerv offer other features such as pre-approved offers, which facilitate a hassle-free and smooth application procedure. Besides credit cards, such offers can be availed on other credit products too, such as business loans, personal loans, etc. One can quickly check his/her pre-approved offer by entering only nominal details like name and contact information.
Apart from pre-approved offers, individuals should look for the following features – ATM cash withdrawal. Credit cards such as the Bajaj Finserv RBL Bank SuperCard also allow individuals to withdraw cash from ATMs for an interest-free period of up to 50 days.
Individuals can also consider credit cards that allow them to avail a personal loan against the unused credit limit on their card. This loan can be availed for an interest-free period of up to 90 days against only a nominal transaction fee. Choosing the right credit card can also go a long way in ensuring easy debt management through features like these.
Nevertheless, credit card users must make sure to reconfirm their information regarding credit card settlement to make an informed decision. On that note, they should also know how to read their credit card statement correctly as it carries essential details about their card’s use for a given period.