Lower Your Debt With Credit Card Debt Settlement

Credit card debt settlement involves satisfying your credit card debt by paying less than you really owe. Credit card debt settlement ranks low on the list of desirable debt solutions, but it’s one that some people must use to pay off debt and avoid bankruptcy.

How Credit Card Debt Settlement Works

There are two methods of credit card debt settlement: through a credit card debt settlement company or on your own. Credit card debt settlement companies should be avoided. They collect your payments for months before making a settlement offer – if they make an offer at all. Meanwhile, you continue receiving collection calls and negative payment marks on your credit report. You’ll get better and faster results settling debts on your own.

Credit Card Debt Settlement Payment Amount

Before you can settle your credit card debt, you have to decide how much you can pay. Credit card debt settlement can typically be done for 10% to 60% of the outstanding balance, depending on the creditor and age of the debt. The more delinquent your account, the lower the amount creditors are willing to accept to satisfy the debt.

Lump-Sum vs. Multiple Payments

You pay in one of two ways – multiple payments over time or a single lump-sum payment. Creditors prefer a lump sum or few payments (like 2-3) and are less likely to agree to a settlement that has to be repaid over several months. Figure out how much of the debt you can pay immediately and offer that. Once you’re negotiating with your creditor, offer an amount lower than what you’re actually willing to pay. That way, you have some wiggle room if your creditor wants to negotiate up.

Negotiating a Credit Card Debt Settlement

Once you have a credit card debt settlement offer, call your credit card company and to talk to a manager, someone in a loss mitigation, or similar department. The customer service representatives you first speak with are usually not authorized to take credit card debt settlement offers and you will always be told “no” when they couldn’t say “yes” if they wanted.

During the call, make sure you write down the name, phone number, and extension of the person you talk to. Also record the date and time of the call and the outcome. Don’t give up with a single phone call. You may get different and often conflicting answers from different people at the same creditor and sometimes even the same person on different days.

Credit Card Debt Settlement Watchouts

Your credit card company might close your credit card after settling your debt. That’s if your credit card hasn’t already been closed. You could also have your credit limit reduced or eliminated all together once the creditor realizes you don’t plan to pay the balance in full.

Credit card debt settlement typically requires you to be a few months behind on your credit card payments. At that point in time, your credit score will take a severe hit. The effect will be worse if you’re late on more than one credit card.

The federal government requires you to pay taxes on cancelled debt, including debt that’s been cancelled through credit card debt settlement. The bottom line, you owe the federal government more money which means you’ll get a smaller refund check or owe more money to the IRS.

Finalizing Your Settlement Offer

Final credit card debt settlement agreements should be in writing. Either draft an agreement of your own or have your credit card company send you an agreement. Make sure you and someone from your credit card company have both signed the agreement before you send payment.

Category Categories: Debt and Loan

Manage Credit Card Debt

Carrying balances on credit accounts is a notoriously unwise credit usage decision, but it’s a trap into which many young money-users fall. If you have accrued a pile of credit card debt, it is vital that you turn your financial ways around and properly manage this debt to ensure that it is paid off as quickly as possible. By managing this debt intelligently, you can overcome it and venture into your financial future a reformed credit card user who is free from your previously overwhelming credit card debt.

  • Pay more than the minimum each month. If you pay only the minimum, paying off your credit card debt will be a lengthy process. Bankrate.com illustrates this by explaining that a $2,000 purchase will end up taking you 30 years to pay off if you only make the minimum payments on an 18-percent interest rate account.
  • Steer clear of your credit limits. If you haven’t already maxed out your accounts, don’t. The closer your balance is to your credit limit, the worse the impact on your credit score. Balances that nestle up to the credit limit are seen as a sign of over-extension.
  • Check your credit account statements several times a month. If you are still using your credit accounts, keep on top of your purchases by using your credit company’s online system to check on the account. This will help you keep track of how much you have spent and act as a reminder not to amass even more debt.
  • Keep a balance sheet if you find yourself frequently overcharging on your credit cards. Use an empty check register or a similar financial documentation sheet to keep a tally sheet of your credit card purchases. At the beginning of the month, write the amount that you can afford to charge and pay off that month at the top of the sheet, as if it were your account balance. As you make charges on the card, deduct these amounts from this available amount. When it gets to zero, stop charging; you are out of money.

Category Categories: Credit

How to Overcome Debt Problems

According to CNN Money, the average American family holds over $10,000 dollars in credit card debt alone. The average interest rate on cards is in the mid teens with some cards exceeding 20 percent. Overcoming debt problems seems impossible for some but the truth is it’s quite simple. It just takes time, discipline and patience.

Track Your Spending

  1. Make a list of everything you spend in a month. At the end of the month, review your list. You will likely find several items that easily can be cut from your spending.
  2. Create a list of bills and other expenses. Gather all of your bills and place them in a pile. List who you owe money to, the total amount and the amount due each month. With credit card and loan agreements list, also the interest rate.
  3. Pay down your highest interest debts first. These cost you far more money in the long run and usually carry heavy penalties for late payments. The sooner you can pay these off the better.
  4. Avoid paying just the minimum. With credit cards, the minimum payment just covers the interest. Pay more than the minimum each month if you can afford it. You’ll start clearing the balance faster.
  5. Put any left over cash in a savings account. Even small amounts start to add up. As the money accumulates you’ll have an emergency fund or extra cash to put toward debt.
  6. Ask for help. If your income isn’t sufficient to cover your monthly outgoings then consider credit counseling. A good credit counseling service can negotiate with your creditors and try to freeze interest and late fees. They can also help you with creating a reasonable budget.

Category Categories: Financial