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Credit Card Debt Relief

Elizabeth Johnson

Financial Advisor
Updated: 12/2017

Opening a credit card can be one of the most exciting experiences in someone’s life. However, without proper knowledge or financial experience, opening a credit card can be one of the most debilitating financial decisions in someone’s life, leading them into the pathway of extreme debt. With the significant increase of interest rates, fees, and charges, more and more people are finding great difficulty in managing their credit card statements and evening struggling to make on-time monthly payment. Does this sound familiar to you? The reality is, hundreds of thousands of credit-card holders are in the same boat as you.

What’s important to know is that you are not alone. In fact, there are multiple financial tools that are available today to help credit card holders find relief, just like you. More specifically, we are referring to credit card debt relief. In today’s article, we are going to dive in and explore what credit card debt relief is all about, whether it’s a viable option for you, and the different forms of credit card debt relief. Who’s ready?

What is Credit Card Debt Relief?

Before we jump into the specifics of credit card debt relief, let’s start with explore what exactly credit card debt relief is. At the core, credit card debt relief is the conceptual background for the process or tactics utilized to bring relief to an individual in great credit card debt – hence the name: credit card debt relief.

Now, the topic of credit card debt relief is often misconstrued by the negative connotation that surrounds the industry; however, at the core of any credit card debt relief program is eliminating and reducing both interest rates and the total accumulated debt. Our goal and intention is to remove the haze and negative thoughts surrounding credit card debt relief in efforts to provide the information for consumers to make financial sound decisions.

When is Credit Card Debt Relief Viable?

The best way to judge whether credit card debt relief is a viable solution for you is to look at your current financial situation. Are you struggling to may monthly payments? Are you barely making ends meet aside from credit card statements? Is the stress becoming too much to handle? If you are finding yourself sacrificing more and more to ensure that a credit card payment is processing, it may be time to consider one of the many options of credit card debt relief. It’s important to know though that, some of the different options available may require a higher than average credit score to qualify. However, there are always different credit card debt relief programs for everyone. With that being said, let’s explore what’s available.

Credit Card Debt Relief Options

At this point, you most likely have learned that perhaps credit card debt relief is a valuable option to consider in efforts of reducing interest rates and eliminating any credit card debt. Like any debt relief program, it’s vital to do proper and thorough research prior to signing any contract. With that being said, there are multiple different options of credit card debt relief that are available to consumers. Let’s see what they are all about:

Credit Card Issuer

The first credit card debt relief tactic that is available for consumers is something we like to call the Credit Card Issuer method. This tactic is actually one that is often mentioned by financial experts as one of the most effective means of credit card debt relief, without the lasting impacts of other debt relief programs. With this method, a credit card holder that is struggling with managing monthly payments can call their creditor in efforts to request credit card relief. The goal with this method is to be honest and genuine with the creditor and let them know what’s happening. It’s suggested that, if borrowers are planning on taking this debt relief route, be sure to have a dedicated plan to share with the company. For example: what are the reasons why you can no longer pay the contracted amount, how long are you requesting such changes for, and/or when you are anticipating making full payments again. In most cases, credit card companies are willing to work with borrowers, only if they are in great-standing with the company.

PROS:

  • This option is entirely free, which can help save money.
  • You can craft the best solution that you believe matches your needs.

CONS:

  • While this may be a great first option, there is always the risk that you may not be approved by the credit card company.
  • Depending on the situation, creditors can garnish paychecks.
  • Through attempting to break the contract, creditors may choose to file a law suit, which can be even more financially debilitating than credit card debt.

Credit Card Debt Counseling

Another great opportunity that is available for credit card holders is to get in touch with a credit counseling agency. This credit card debt relief method tends to be one of the most cost-effective and, in some cases, it’s free. Here, credit card holders can speak with trained professionals in the debt industry about their situation. As credit counselors, these agencies are designed to help evaluate credit card holder’s situations and offer the best possible feedback and solutions. In most cases, it’s suggest that, before picking just any credit card debt relief program, seek professionals at a local credit counseling company first. Now, before you are quick to schedule a meeting, be sure to see if the counseling agency charges any fees. Since there are non-profit and for-profit companies, it’s important to decipher the type of company you will be receiving advise from. We also advise credit-holders to stay away from credit counseling agencies that make bold promises, such as “eliminate your debt” or “stop making minimum payments forever.” Companies or agencies that do this are scams and not worth your time.

PROS

  • Credit card holders can seek professional and expert advice, learning precisely what their best options are according to their specific situation.
  • Non-profit Credit Counselors tend to have credit card holders’ best interest at the forefront of their solutions.
  • With credit counselors, credit holders will no longer have to make their monthly payments. These agencies will handle monthly payments to ensure everything is handled properly.

CONS

  • Depending on the type of company or agency you pick, they may charge for their counseling services. In our experience, it’s recommended to select a non-profit company to avoid this problem.
  • In the eyes of lenders and other financial institutions, utilizing credit counseling companies appears in the same category as an individual that files for a Chapter 13 Bankruptcy.

Credit Card Debt Settlement

Out of the many different forms of credit card debt relief, debt settlement is typically the most controversial. Debt settlement for credit card debt is when credit card holders simply stop making their monthly payments to their creditors. During this process, a third-party company, or a debt settlement company, jumps onto the scene to help negotiate your total debt in efforts to reduce it. For payment purposes, credit card holders are responsible for making monthly payments to the debt settlement company and, in response, the company will forward the funds to the credit card companies. Debt settlement for credit card debt relief should be seen as the second to last straw if no other credit card debt relief options worked. Reason being, the risks and consequences are so grand that it can impact a credit card holder for years upon years.

PROS

  • Individuals who enroll in debt settlement for credit card debt relief will notice that their debt may be reduced. There is no exact statistic proving how much; however, this is the main purpose for this relief program.
  • Like debt consolidation, debt settlement takes an individual’s multiple monthly payments into one cohesive payment.

CONS

  • Debt settlement is, without question, one of the most debilitating debt relief programs for your credit score. The moment that a borrower stops making their monthly payments, the credit bureau will be aware, and this will show as a delinquency. Typically, the debt settlement process between the company and the creditor takes four-five months, meaning, during this time, the credit bureau will think you are late for this period of time, stacking late fees upon late fees and other applicable charges. This will appear on your credit report for a maximum of seven years.
  • Since there is no guarantee or promise that a debt settlement company will come to an agreeance with your creditors, there is a significant risk factor that may even increase your starting credit card debt.

Credit Card Debt Consolidation

Are you the type of consumer that has multiple credit cards, all of which are maxed out and generating more and more interest charges? Are you struggling to stay on-top of your four or five credit card statements? This is where credit card debt consolidation companies come into the picture. Like typical debt relief debt consolidation companies, credit card debt consolidation companies specialize in credit card debt relief. At the core credit card debt consolidation is when a consumer opens a new loan to pay off all of their credit card debt. The purpose of this is to organize all of their credit card payments into one monthly bill at a lower interest rate, all in hopes of saving more money. Credit Card Debt Consolidation can be a fantastic means of credit card debt relief; however, there are a few disadvantages that people must be aware of.

PROS

  • Debt consolidation is a great method to help individuals organize their credit card debt into only monthly bill.
  • Debt consolidation can most certainly bring forth a strong sense of credit card debt relief for individuals that are feeling buried deep in credit card debt.

CONS

  • If an individual utilizes their home loan or other physical assets as collateral, debt consolidation companies may acquire these assets if they default.
  • If an individual is not careful during the research phase, they might end up paying more money than they would have if they did not consolidate their debt.

Bankruptcy

The absolute last case scenario of credit card debt relief is bankruptcy. In fact, the only people that should be thinking about this are those that are beyond their knees in credit card debt.  Typically, many people have no idea what bankruptcy actually is. In fact, if you ask around, many people think it’s when an individual loses all their Monopoly cash and hotels. However, we are not talking about passing go and collecting $200. Bankruptcy is gravely different. When it comes to credit card debt relief, bankruptcy should only ever be an option if there are literally ZERO credit card debt relief alternatives left. Here, credit card holders, there are two different types of bankruptcies to claim:

  • Chapter 7 – This is where the court system will, by law, eliminate all unsecured debt from an individual’s record.
  • Chapter 13 – This is known as the “reorganization” debt relief plan. Here, an individual will be required to pay back their debt within a specific time frame and with specific guidelines.

In either case, bankruptcy is incredibly risky and life altering. While it may offer a fresh-start in some circumstances, do take into consideration the many different disadvantages before taking this route.

PROS

  • By claiming bankruptcy, it may give an individual a fresh opportunity to restart their personal finances.
  • If you are constantly being heckled by credit card companies, after filing bankrupt, by law, these companies will no longer be able to contact you.

CONS

  • Bankruptcy is a financial decision that places your entire personal finances in the jurisdiction of the court system.
  • Through filing bankrupt, your credit report will show to lenders for up to 10 years that you claimed bankruptcy.
  • Once claimed, you can anticipate an increase of interest rates because future lenders will view you as a risk.