Credit Card Settlement Definition

Credit card settlement is an approach to debt reduction which is also known as account arbitration or negotiation. Credit card settlement is usually offered by creditors to debtors who appear unable to make routine payments. The creditor seeks to avoid the debtor’s bankruptcy by writing off a large portion of what is owed—often as much as one-third of the total amount—in exchange for a promise to pay regularly in the future. While it does reduce debt, credit card settlement is always reported to the account holder’s credit history.