When you become significantly behind on credit card payments, the credit card company may accept a payment less than the balance owed to settle the account. However, consumers should understand that there are both advantages and disadvantages to settling.
Advantages of Settling
The primary advantage of settling credit card debt is that you can eliminate the debt. The settlement also can free up cash in the monthly budget as a monthly payment will no longer have to be made.
Disadvantages of Settling
When you settle a credit card account for less than the amount owed it may be noted on your credit report and have an adverse effect upon your credit score. However, credit card companies will normally not settle unless the account is delinquent in which case the report may already have negative notations that will lessen the credit score anyway.
Settlement Documentation
Consumers who are settling a credit card debt need to have the settlement terms in writing before making a payment. This will assure that there is no confusion as to the terms as well as providing proof of the settlement.
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