Credit Card Relief Programs Tips & Advice
- 5 min read
- Don't let financial stress stop you from taking action to resolve your debts.
- Compare the pros and cons of debt settlement and credit counseling.
- Use Bills.com's free Debt Coach tool to find your best debt relief option
Find the Right Credit Card Relief Program
Are your finances at the breaking point? If you have credit card bills that you can't keep up with or feel you can't hold things together much longer, make sure to check out the different credit card relief programs available. Millions of Americans have reduced their debts through a debt settlement program or saved money by using a credit counseling service.
Getting out of debt isn't easy. It takes a plan of action and the discipline to follow it through. Don't be overwhelmed or paralyzed by the stress your bills cause. Just start taking action, before the plates you're balancing come crashing down.
Quick tip #1
Receive a free, no-hassle debt relief quote from one of Bills.com's pre-screened debt providers.
Credit card relief programs can help you with more than just credit cards. They specialize in helping you with different types of unsecured debts, debts that are not backed by collateral. In addition to credit card bills, a quality credit card relief program can help you with:
- Unsecured personal loans
- Auto repossession deficiency balances
- Foreclosure deficiency balances
- Medical Bills
- Some student loans
Types of Credit Card Relief Programs
Debt Settlement- Debt settlement helps you get debt relief by reaching reduced, negotiated settlements with your creditors. The settlement firm that you hire uses professional debt negotiators so you don't have to deal with the creditors. Reputable debt settlement firms don't overpromise and will give you an honest presentation about the pluses and minuses.
Debt Settlement Pros
- No up-front fees- Only work with settlement firms that do not charge any advance fees. Look for membership in the AFCC (American Fair Credit Council), the leading debt settlement industry trade group, whose members won't charge you a fee for any account until it is settled.
- Short program- Resolve your debt in 24-48 months, the fastest way to resolve debt outside of a chapter 7 bankruptcy.
- Low costs- Knock off thousands of dollars in principal and future interest costs. Not only are principal balances almost always reduced, you don't end up paying the years of interest you would be stuck paying were you making minimum payments to pay your debt.
- Low monthly payment- Your program payment is usually much less than your current required minimum payments. The more you are able to pay, the faster your debt gets settled.
- Your money is safe- Your money is kept safe in a bank account that remains in your control.
Debt Settlement Cons
- Credit Rating- How your credit rating is affected is not so important, if your credit rating already is damaged. However, if you have decent credit, don't choose debt settlement unless getting out of debt is more important to you than the status your credit rating.
- Collections- Debt settlement is not for the faint of heart. No debt settlement company can guarantee that you won't receive collection calls or that a creditor will not pursue aggressive collections against you. A good firm will advise you on how to deal with them, take steps to reduce them, and handle communications with your creditors. But, if the money you will save in debt settlement is not worth a little discomfort, choose another debt relief option.
Consumer credit counseling offers you relief by working to reduce your credit card interest rates. You can get a free consultation and a receive a proposal that will lay out for you: the size of your monthly program payment, how much you will pay in fees, what your new interest rates will be (not every creditor is willing to reduce its interest rates), and how long it will take to complete the program and pay off all your debts.
Credit Counseling Pros
- Reduced interest rates- Because it focuses on reducing your interest rates, credit counseling is most effective if high interest rates are your biggest debt problem. No collection calls- Because your creditors are receiving payments each month, you won't receive collection calls
- One monthly payment- Instead of making multiple payments, with different due dates, you'll make one monthly payment.
- Free budget counseling- Even if you don't hire the credit counseling firm, you should benefit from a free, detailed financial analysis and budget review they offer.
Credit Counseling Cons
- High dropout rate- About 3 out of 4 people who enroll in credit counseling drop out, not achieving the goal they set out to achieve. Limited payment relief. Monthly payments in a credit counseling program may not be lower than what you currently pay. If you are struggling to meet your payment obligations now, don't commit to a credit counseling payment, unless you are confident you can make it each and every month.
- Credit Rating- Your credit profile can suffer in three ways in a credit counseling program.
- Late payments can occur in a credit counseling program, especially in the initial months, when the interest rate concessions are being worked out.
- It is common for your credit report to show that the accounts enrolled in the program are "under the supervision of a debt management service." Lenders look at this notation as if you are enrolled in an chapter 13 bankruptcy.
- You often have to close accounts enrolled in a credit counseling program. It harms your credit to close accounts you have had open for a long time.
Quick tip #2:
Check out Bills.com's free DebtCoach tool. Debt Coach helps you evaluate your situation and offers you a debt relief solution that's based on the goals you specify and your individual financial situation.
Keeping Your Finances on Track
Create a spending plan- A cornerstone of long-term financial health is maintaining a budget. Live within your means. Too many people who wipe out debt through a credit card relief program or through a debt consolidation loan, end up running up new debt and find themselves back in a debt hole a few years later.
Maintain your discipline - To make a credit card relief program succeed, you need to make a monthly payment every months for a number of years. That takes a lot of effort and discipline. Once you complete the program and cleared out your debt, don't lose your momentum. Keep making the same monthly payment to yourself: into a retirement account or rainy-day fund.
Did you know?
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Housing debt totaled $12.26 trillion and non-housing debt was $4.65 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
Collection and delinquency rates vary by state. For example, in Indiana, 17% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 4%.
To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.
Good post on credit card relief services and debt settlement schemes.
Thank you Dave. Finding the right credit card debt relief program is tricky and it is important to weigh carefully the alternatives. Glad that you found the information helpful.