You’ve probably seen ads for companies offering to settle your debt. But most people don’t need to pay someone else to put together a debt settlement program. Here are five things to remember about negotiating a debt settlement.
- Not everyone qualifies for debt settlement. Most creditors won’t discuss debt settlement with people who aren’t in serious financial trouble. If you ran up credit card debt and earn enough money to pay it back, don’t expect to qualify for a debt settlement program with your creditors. Read the rest of this entry »
Credit counseling and debt consolidation services may enjoy booming business in 2010 as outrage grows over credit card companies’ increasing rates, fees, and penalty charges in anticipation of legislation regulating such activity. In a letter to Federal Reserve Chairman, Ben Bernanke, Connecticut Attorney General, Richard Blumenthal, urged the Federal Reserve to use its authority under the Credit Card Act of 2009 to reverse recent interest rate hikes and increased fees to rates in effect one year ago.
Surprisingly, many consumers receiving notices of increasing credit card costs are frequently good to excellent customers who pose less risk of default than consumers with fair to poor credit. Allegations that taxpayers are suffering a double whammy with bank bailouts and increasing credit card costs could cause consumers to rebel by paying off credit card debt and avoiding future use of credit cards. If you’re considering this, there are a few things to keep in mind:
Make a plan to pay your credit card debt: If you’re carrying balances on credit cards, chances are you don’t have the funds to pay everything off at once. Establish a repayment schedule from highest annual percentage rage (APR) to lowest (see below), and prioritize payments to the highest APR debt first. As each debt is paid off, add the amount you’ve been paying to the payment amount for the next highest APR debt.
Cut yes, close no: Get out your sharpest pair of scissors and destroy the credit cards you’ve stopped using, but don’t, repeat, don’t close the accounts. This may sound counter productive, but major credit reporting bureaus base your credit scores in large part on your available credit. Closing your accounts, especially those with high credit lines, can lower your credit scores. In some cases, closing accounts that charge membership or maintenance fees may make sense, but avoid closing accounts spontaneously and without careful consideration.
Pay off your highest cost credit card debt first: Check your credit card statements for the APR on each account. This information is required by federal law and is prominently displayed on your credit card statement. If you receive your statements online, you may have to scroll down and read the fine print to find the APR. Just follow the “Click here for statement displaying APR” link.
Get debt consolidation and credit counseling help: If you’re unsure of how to address credit card debt, or are being harassed by debt collectors, please seek help. Consumer credit counseling services can provide assistance including debt consolidation and negotiating affordable repayment terms with creditors.
Take “charge” of your finances and start eliminating credit card debt today.