Top Credit Card Issuers Provide Some Relief to Troubled Cardholders

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The nation’s top 10 credit card issuers have agreed to provide additional relief to cardholders finding it difficult to make their monthly payments. This is in addition to the traditional debt management programs already available through consumer credit counselors.

Last fall, the National Foundation for Credit Counseling (NFCC) issued a “Call to Action” asking creditors to make debt management programs more affordable for consumers to help a larger cross section of people.

“This represents a significant action on the part of the creditors to take additional steps to help consumers, which is our collective mission,” said Susan C. Keating, president and CEO of the NFCC. “This will provide those in debt with more options to stabilize and rebuild their economic lives.” “Many consumers are facing serious financial problems, and they should be given every opportunity to qualify for an affordable program that meets their individual circumstances and that puts them back on the road to financial stability,” said Keating. “We applaud these creditors for recognizing the need to do more for consumers who are trying to avoid bankruptcy, and need some additional help with interest rate and fee waiver concessions so they can repay their debt.”

The credit card issuers that have agreed to participate are American Express, Bank of America, Capital One, Chase Card Services, Citi, Discover Financial Services, GE Money, HSBC Card Services, U.S. Bank and Wells Fargo Card Services.

Critics of consumer credit counseling have long argued that a traditional debt management program is to expensive for most that are trying to resolve a financial hardship. In most debt management programs, the cardholder is put into a program where their outstanding debt is paid over the course of 5 years. During that time they are unable to obtain new credit. Their monthly payment typically ranges between 2 and 3 percent of the outstanding balance. Given that the average credit counseling client has $24,000 in unsecured consumer debt - their average monthly payment is between $480 and $720 per month.

The above mentioned credit card issuers will now offer an additional debt management program for those that are unable to qualify for a traditional debt management program due to lack of income. The repayment rate under this plan would be a minimum of 1.75 percent. For the cardholder that was unable to afford to pay $720 per month under the old guidelines would now only be required to pay as little as $420 per month.

Traditional debt management programs require borrowers to use every spare dollar to pay down their credit card debt. The new debt management programs being rolled out will also encourage cardholders to begin building a financial safety net during the process to help reduce their dependence on credit in cases of emergency.

In the past, if you were were unable to qualify for a debt management program you would often explore other options like debt settlement, debt consolidation, or bankruptcy.  The improved terms available through consumer credit counseling are worth a second look if you are wanting to protect your credit, you have a stable job and income, and you can afford the reduced minimum payment requirements.

About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges.

Post written by Chris Rocks

One Response to “Top Credit Card Issuers Provide Some Relief to Troubled Cardholders”

1. gpogol Says:
   April 22nd, 2009 at 5:18 pm

   I had no idea. I knew some of the credit counselors were actually banks in sheeps clothing but this is the first I’ve heard they are TRYING to help. Cool.

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