A credit card settlement plan can help you resolve credit card debt for less than the full balance owed. However, these plans must be used carefully to avoid pitfalls. In this guide, you will learn about credit card settlement plan in the UAE, how credit card settlement works, and get tips on using credit card settlement carefully.
What is Credit Card Settlement?
Credit card settlement, also called debt settlement, involves negotiating with your credit card company to pay a lump-sum amount that is less than the total debt owed. The credit card company agrees to consider the remaining balance “settled” and stop all collection efforts.
For example, if you owe $10,000 on a credit card, a settlement could involve paying $6,000 to have the account closed and settled.
How Does Credit Card Settlement Work?
You can negotiate credit card settlement yourself or use a debt settlement company. For credit card settlement, you will be:
- Connecting with a professional credit card settlement company to help you guide throughout the process.
- Coming to an agreement on the settlement amount and terms. Get settlement terms in writing before sending payment.
- Sending your lump-sum payment to the credit card company. Keep proof of payment.
- Waiting for the credit card company to report the account as “settled” and cease collection efforts.
- Feeling relieved of the financial burden you had for so long.
Tips for Using Credit Card Settlement Plan
If you are considering credit card settlement plan in the UAE, the following tips can help you navigate the process seamlessly:
Set Aside Funds
- To settle an account, you need a lump-sum equal to the negotiated payoff amount. Set aside funds and don’t touch them until the account is settled.
- Saving enough to settle an account might take a significant time. Avoid settling too early before you have the full amount.
Consult a Tax Expert
- Depending on your specific situation, credit card debt forgiven under settlement may be considered taxable income.
- Talk to a tax professional to understand any potential tax implications before settling.
Don’t Settle Too Many Accounts at Once
- It’s best not to settle more than 1 or 2 accounts within a short span. This limits damage to your credit.
- Settling several accounts simultaneously will also take a heavy toll on your credit score.
Weigh Alternatives
- Also consider options like credit counseling, debt management plans, balance transfer cards, or debt consolidation loans.
- Settling may be your best option, but evaluate all alternatives before deciding.
When used carefully under the guidance of a reputable credit card settlement company, credit card settlement in the UAE can help you resolve unaffordable debt for less than you owe. Just make sure you plan ahead and get professional help to reach the optimal outcome. With the right approach, settlement can offer financial relief after you’ve gotten in over your head with credit card debt.
