‘Buy now, pay later’ – that’s the premise credit card companies work on. They offer you the convenience of buying things that you otherwise can’t afford or pay for instantly. It’s a perfect arrangement- but only as long as you have the ability to repay! And this is what many credit card users fail to understand. Most consumers have multiple credit cards and have a tendency to overuse them. And by the time they realize this, they’re entangled in a complex web of credit card debts.
With continuous reminders from credit card companies and mounting interest amounts, the experience of being trapped in credit card debts can be quite tormenting. But worrying about it won’t get you out of trouble. Here are some simple steps that can help you settle credit card debts:
Also Read: Your first step to freedom from debt
Step 1 – Assess your credit card debt situation
Depressing as it may be, in order to settle credit card debts, you should know exactly how much trouble you’re in. Look up your latest statements to answer these questions:
- How much you need to pay off?
- Are your interest rates too high?
- Have you been defaulting payments? If so, for how long?
- What is the minimum amount you’re required to pay?
Step 2 – Understand Debt Negotiation / Settlement
Debt negotiation or settlement would mean that you make an offer to the credit card company to repay the debt if they agree to settle for a lesser amount than what you owe. But if you are doing this, you should be ready to pay the amount settled on, upfront. This can be beneficial because of two reasons. Firstly, you would be paying an amount lesser than what you owe. And secondly, it also means you wouldn’t have to pay any more interest.
Step 3 – Evaluate Risks
Debt negotiation is a great option if you want to bring down the amount you owe to the credit card company. But it also poses some obvious risks. It could mean a cut in your credit line, which could make your card unusable in the future. Or, it can impact your credit score depending on how the settlement is reported by the credit card company to the credit bureaus.
Step 4 – Negotiate your debt
Once you’ve thoroughly understood your options and risks, talk to your credit card company and work out a settlement. Here are a few things you could request:
- A reduction in the interest rate
- A waiver of the late payment fee
- A lower monthly minimum payment
- A lump-sum settlement for an amount lesser than what you owe
Another simple method of being free of credit card debts is opting for a debt consolidation loan or credit card refinancing. This can help you reduce the burden of repayment to a considerable extent while simplifying the repayment process. So, go ahead and take that first step. Do away with your credit card debts!