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What is Credit Card Settlement? How Does it Work?

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Created on
February 24, 2023


What’s Inside

When a credit card user is not in a financial position to repay the credit card bill, they approach the bank or the card issuer and request a settlement. A settlement can involve a number of options from a credit transfer to converting the credit card bill into an EMI.

This article covers the ways in which a credit card settlement is carried out, and what it means for the user and their credit score.

What is Credit Card Settlement?

  • Credit card users may pile up debt for several reasons. Financial emergencies and reckless expenses are some examples. Whatever the reason, credit card debt might have serious consequences for the user. For instance, their credit score may take a serious hit.
  • Moreover, the card issuer may serve them with a legal notice.
  • Additionally, it may become difficult for the them to apply for new cards or loans in future. This is not permanent, and can be reversed over time once the repayments are made. The credit card settlement process in India enables customers to pay their dues.

Here's all you need to know about how to pay your credit card bill.

When Should You Choose Credit Card Settlement?

Settlement is not an option you can take whenever you hit a rough patch financially, and are unable to pay your dues. Because financial institutions do not usually approve settlement requests often or easily.

There are high chances that your card issuer may reject your application if you do not pay a lump sum amount. Moreover, the credit card settlement percentage is not uniform. So, the actual settlement amount may depend on how well you negotiate with the card issuer.

The Process in India

  • Contact your credit card issuer or approach a debt settlement agency.
  • Write a credit card settlement letter stating why you cannot repay your card dues.
  • Also, write that you want to explore alternative repayment terms. You may also express your willingness to pay a lump sum amount. But, if you have filed for bankruptcy, show that as your reason for not repaying. 
  • Wait until your card issuer sends a reply letter. The issuer may or may not accept your settlement request. 


In conclusion, credit card settlement is a viable option for individuals who are unable to repay their credit card bills due to financial constraints. However, it is not a decision that should be taken lightly, as it can have significant consequences for one's credit score and future financial prospects. The settlement process involves reaching a mutual agreement between the card issuer and the customer, either through a lump sum payment or a negotiated settlement amount.

Instant Loans, Instant Approvals

Fi Money provides instant loans that arrive directly in your account. These are pre-approved personal loans made available to select users with good credit scores. On Fi, this process is 100% paperless, and the loans are provided at competitive interest rates — where each user remains in control with complete visibility of all details. Plus, you can avoid EMI late fees by setting up automatic in-app payments. Our RBI-licensed partner bank assigns an eligible loan amount to each user (up to ₹5 lakh).

Frequently Asked Questions

1. Is settlement good for credit cards?

No. Credit card settlement affects your credit score negatively. A negative credit score may make applying for new loans or cards difficult. 

2. What percentage of the credit card bill can be settled?

No fixed rule specifies the credit card settlement percentage. It depends on the analysis done by the card issuer. The card issuer may also reject the application and take the customer to a court of law.

3. Does credit card settlement affect my CIBIL score?

Yes. Credit card settlement affects the cardholder's CIBIL score negatively. But, the impact will be greater if the cardholder does not pay anything. 

4. Can credit card settlement be negotiated?

Yes. You can negotiate your credit card settlement amount. Your card issuer may decrease the settlement amount if they feel you are serious about repaying the outstanding due. But note that this is generally quite unlikely. Usually, the credit card issuer will pass the settlement case to a recovery agency that might use some very harsh tactics to recover your bill amount.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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