Remove Credit Card Debt – How To Significantly Reduce Credit Card Debts

Remove Credit Card Debt How To Significantly Reduce Credit Card Debts

Many Americans are struggling with their financial obligations. Job losses, rising costs, and climbing credit card late fees only make the problem worse. If you are struggling with debt, you may be inundated with offers from companies willing to negotiate and reduce, or eliminate your credit card debt. What should you do? Here are a few frequently asked questions regarding debt settlement or debt negotiation services.

Why would credit card companies be interested?

With the number of troubled or delinquent customers increasing, banks are often willing to negotiate some sort of settlement. The alternative is to risk having a client simply not pay, or file for bankruptcy. If either occurs, the credit company may get little or nothing. With a settlement plan, there is opportunity for the credit company to recoup at least part of the loan.

What is the catch?

First, these services are not free. Debt elimination companies are in business to make money. They make that money by charging you a service fee. That fee is money that could be put directly toward paying off your debt. So, if you work with one of these companies you may be trading convenience for money. If you are struggling with debt, any money you can save and put directly toward debt pay-off is a good thing.

Another downside is that you risk significant damage to your credit rating. Any settlement reached will likely impact your FICO credit score. Additionally, there are firms that are not scrupulous about paying on time, or even every month. If you are truly struggling, your credit rating may already have been impacted, but the situation may be salvageable. If there is going to be an impact to your credit rating, it is better to be aware and in control. As noted above, you can often save yourself money and credit damage by doing any negotiation or settlements yourself.

Is there a time when these options might be good?

Perhaps. If your situation is extreme, it may well be worth contacting a debt elimination organization. However, the costs and disadvantages should make this one of the final options you explore. If you are considering a debt elimination company, be careful. There are legitimate companies helping people reduce or eliminate debt. Unfortunately, there are also a number of scams.

Is there another option?

In many cases you can create your own plan to systematically pay off all your credit card balances. There are several approaches that can work. However, most of them boil down to the same strategy. Create a pay-off order, and pay the minimum balance on all but the first card in your order. Pay extra on that balance each month until it is eliminated. Then, do the same with the second card balance, adding the minimum payment amount from the first card. Keep repeating until all balances are at zero.

One final note, in order for any plan to be effective, you must stop borrowing money from the credit card companies. If you don't, any debt settlement, consolidation, or elimination program will only grant temporary relief and you will soon be back in the same situation.

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