HDFC Credit Card Settlement: Process, Eligibility & Alternatives

The HDFC credit card settlement helps to close your overdue account without having to pay the total amount you owe. However, according to CIBIL, you will find that in case of the HDFC credit card settlement, your account gets “Settled” instead of “Closed”.

Key Takeaways

• As per CIBIL, “Settled” specifically means there was a partial payment, made with the lender's consent, against your total outstanding amount, and this status is treated less favourably than a fully “Closed” account.
• HDFC Bank treats a credit card account as a Non-Performing Asset (NPA) if the minimum amount due is not paid in full within 90 days of the payment due date. 
• The maximum interest that could be charged on credit card loans is 3.4%, but there are competitive interest rates based on the usage of the bank and its customers.

Behind on your HDFC credit card payments and thinking that settling might be the right move for you? In this guide, we explore what settlement really means, how exactly it affects your CIBIL score, and the other options that may be available to you.

What is HDFC Credit Card Settlement?
Settlement of the HDFC credit card is an official agreement where the bank agrees to accept an amount that is less than the total dues owed, after which the account is marked as “Settled”.

There are no official eligibility criteria set by HDFC Bank for the process of settlement. The request is judged based on the internal policy of the bank. As settlement takes place only if there are issues in repaying the total dues, it would be better to contact HDFC Bank and find out if your account qualifies for settlement. 

If the dues owed are left unpaid for a long period of time, then the credit card account becomes a Non-Performing Asset. At HDFC Bank, a credit card account becomes an NPA if the minimum amount due is not paid within 90 days of the due date.

What happens to your CIBIL score after HDFC settlement?

After a settlement, your account may be reported with the status "Settled" instead of "Closed." Lenders who check your credit report later can see this status.

TransUnion CIBIL explains that “Settled” means you paid an amount less than the total payable, with the lender's agreement. Here's what that means for you:

• The account is marked as settled: Once you pay the agreed settlement amount, HDFC Bank may report the account as “Settled.” The settlement amount is less than the full amount payable. CIBIL says you can pay the remaining outstanding amount to have the status changed to “Closed.” Ask HDFC Bank for a settlement letter as proof of what you paid.
• Lenders may see the status as risky: CIBIL notes that lenders tend to view a “Settled” status as risky, unlike a “Closed” account that reflects full repayment.
• This gets reported to the bureaus: The lender reports the account information to credit information companies in accordance with applicable requirements and its reporting practices.

HDFC settlement vs other options: What's right for you?

A settlement and a restructuring work in different ways. In a settlement, you pay less than the full dues, and the lender closes the account. In a restructuring, the lender changes your loan terms, such as the tenure or EMI, and you repay the full amount over time. Before you choose, ask HDFC Bank how each option will be reported to credit bureaus. 

Here's how the main options compare:

In case there is any missed payment, it is advisable that one should get in touch with the lending institution as soon as possible. One can ask if the EMI will be reduced, increase the tenure of repayment or provide a small break from making payments. This all depends on the lending institution’s policy.

How much can you save with an HDFC credit card settlement?

There is much variation in the savings from settlement, because the savings will be determined by the bank according to your personal financial position and the period for which your account has been in default.

Under RBI's Framework for Compromise Settlements, each lender decides settlements under its own board-approved policy. So the amount you settle for depends on HDFC Bank's assessment of your case. Settlement percentages quoted online may not apply to your account. The factors that may affect your settlement amount include: 

1. Length of time since the account was past due: Find out from HDFC Bank if the length of time for which your account is overdue has any bearing on the amount of the settlement being offered.
2. Documented proof of hard times: Should there be any situation of loss of income, a medical crisis, or something of the sort, get evidence to document it and use it when making the offer to HDFC Bank. It would depend entirely on how HDFC Bank evaluates the evidence.
3. How the settlement amount will be paid: Find out if HDFC Bank wants the settlement amount paid at once or in installments. This information could assist you in making an offer that is realistic.

Since HDFC Bank assesses each settlement request under its own policy, the final amount can vary from case to case. Keeping this in mind may help you avoid relying on settlement percentages you see online. 

Step-by-Step Guide to the HDFC Credit Card Settlement Process

HDFC Bank considers settlement requests under its applicable policies and the RBI's framework on compromise settlements. 

Here is the process:

1. Check your account status: Look at your latest statement to see how long your dues have been unpaid. HDFC Bank treats a card account as a Non-Performing Asset if the minimum amount due stays unpaid 90 days after the payment due date. Ask HDFC Bank whether a settlement is available for your account. 
2. Prepare supporting documents: Collect relevant documents that may support your financial hardship or inability to repay the outstanding amount in full.
3. Submit a formal request for settlement: Send a formal letter to the bank where you explain your position and why you cannot make full payment.

How Does HDFC Credit Card Settlement Impact Your CIBIL Score?

The effect of settlement can continue over the following months and potentially longer because the ‘Settled’ status can have a long-lasting impact on your credit profile.

Here's the longer-term mechanics worth understanding:

• The marker stays visible for years: A settled account typically remains on your credit history well beyond the settlement date itself.
• Future lenders see this as a risk signal: Banks assessing a fresh loan or credit card application generally view a “Settled” account less favourably than one that was fully repaid.