Debt Consolidation Government Loan

A look into Credit Card Debt Reduction Companies

Hi my name is Stephen Bis and I have been working in the credit card account debt reduction industry for over 10 years now and have been in the financial industry for over 20 years. The reason for me putting up this hub is to give American consumers a heads up on credit card account debt reduction companies also known as debt settlement or debt negotiation companies. I will give you the advantages and drawbacks of this process and what to look out for when speaking with a company to assist you in getting out of debt. Before I go any further I would like to let you know this will be a pretty long article and by the end of it my goal is to have you completely comprehend how the debt negotiation/settlement method works in case you don’t already know and I would like you to know the tactics of companies out there that don’t truly have your best interest in mind.

For starters I would like to state that the procedure of debt negotiation as your means of charge card debt reduction isn’t for all, some folks are more qualified for bankruptcy and others simply don’t have the right mindset to go forward with this process.

I would like you to first understand what debt negotiation is and how it works. The ultimate goal of a debt negotiator is to obtain a debt settlement for the client on the current debt amount owed to the creditor. So for example you may owe one particular creditor $20,000 so the goal of the negotiator would be to have you end up paying back at most around $12,000. The two primary benefits of going through this process are to save money on what you currently owe the credit card companies and to save time. By merely paying the minimum payment with even a moderate annual percentage rate you will be looking at thirty or more years to get out of debt, with a manageable debt negotiation program you will be out of credit card debt within three years or sooner depending on your current financial situation and how fast you can accumulate the funds to do so.

Now you must realize these are tremendous financial advantages but as with everything in life there are a few downsides, nothing is perfect and this credit card account debt reduction procedure is certainly no different. First off your creditors will not be in a position to negotiate a debt settlement at all if you are current and on time with your minimum payments. They would love for you to stay running on their credit treadmill for the next three decades and pay them back over five times the balance in interest alone. So to be clear the account must be into default first in order to begin the process of negotiations with the charge card account companies. I’m not advocating someone who is perfectly capable of paying to quit paying their bills. This process is really for someone who is already in default or realizes that it’s only a matter of time before they will default.

So naturally for many people the beginning of this procedure will have an adverse effect on their credit rating. For the consumers who are already in a default status then the negative effect will be no different than it already is. It’s sad to say but for some people this will be the one factor that holds them back from going into debt settlement making them a slave to their creditors for the at least the next three decades. But there is good news, this negative effect does not last forever, in fact once the settlements get paid off your credit score will begin to recover and shoot back up. The reason is because over 30% of your credit rating according to Fair Isaac’s MyFICO is based on how much debt you owe. So if you are trapped in a bad debt situation even if you are up to date with your payments your score is more than likely not all that great in the first place; and besides when stuck deep in debt your number one priority should be on how to get out of credit card account debt as soon as you can, not on your ability to accrue future debt.

Now by falling behind on your payments you must realize that these creditors are just not going to leave you alone, they will be calling to attempt to collect the debt. For some people this is not an issue at all, for others it is, that is why I mentioned above this process is not for everybody and the consumer must be in the right mind set. From all my years of helping American consumers there is no rhyme or reason to how many collection calls you will receive, some clients of mine rarely get calls while others get them on a daily basis. Something to keep in mind too is that no organization has the power to legally stop the calls, so any corporation that tells you they can is flat out lying. Some companies may be able to cut back some of the calls but no one can guarantee them all stopping. As you can see like I said earlier there are advantages and drawbacks, but if you are willing to accept the drawbacks you will be quickly on the road to debt freedom and will save a ton of money in the process. Now to get to why I named this article “charge card account debt reduction scams”.

We living in the United States over the last few years have been going through a very bad downswing in our economy. Thus forcing many consumers into compromising positions financially, leaving large sums of Americans riddled with charge card account debt. So understandably this opened up a much bigger marketplace for debt reduction. Many fly by night organizations have been shooting up all over our nation, many of which are ex mortgage lenders who sold people sketchy loans and helped them get into this messy position to begin with. Now I use the word “scam” which can take on a couple of different meanings, while sure there are some companies out there that are flat out scams and have no real intent on doing any work for you at all, most of the times that is not the case. Instead a lot of companies simply don’t offer people all the truths on how debt negotiation works nor do they honestly put them on a plan to succeed, which I will explain more in depth momentarily.

One common problem that many folks have with debt settlement companies is they do not fully disclose to them about how the process is going to work, instead they sugar coat everything and go on about the wonderful benefits. I have spoken with numerous amounts of people who have enrolled with a corporation and were under the impression that they were going to stay current and be on time with their creditors and will never receive any collection calls. So without needing to mention this became a big problem once they began the program.

Another big problem a lot of these companies have is misleading people into the type of savings they will be receiving on their debts. Some companies will say they can save you 70% of what you currently owe. Now while they may achieve getting settlements that low what their opting not to tell you is how much you will be saving after you have A) paid their service fees, and B) paid back your creditors. Truthful companies will tell you what your true savings will be. If you will save somewhere between 40-50% of what you owe including their fees and paying the creditors than that is pretty darn sweet of a deal. In addition most of these companies will try and guarantee a certain percentage of savings, if you hear this run for the hills. NO one in this industry can guarantee a certain amount that is why it is called DEBT NEGOTIATION! They are negotiating to get a settlement for as low as they can get. With that being said right now some companies are achieving amazing results because of how badly the creditors need cash due to this bad economy. There has never been such an opportune time for consumers who are struggling badly with debt to take advantage of the great savings they could realize from debt settlement. Perhaps being one of the only benefits of this horrible recession.

Then there are the companies who will let you pay whatever you can afford to sign up with their program. These are the most evil because they do not actually have your interest at heart and know they are putting you on a program to fail and not succeed. You must realize to achieve the sort of savings I stated above this process should take no more than three years, preferably two or less, in some rare cases it can be extended to four. And the bottom line is some people realistically cannot afford to get it done in that time schedule and should realistically be looking into a bankruptcy proceeding. What these unprincipled credit card account debt reduction companies will do is place you onto a program for 4 or more years and basically take whatever payment you will give them. Knowing full well you are not going to be saving much of any real amount of cash and will more than likely flunk off the program, all they are concerned with is getting the fees and that is it. A sincere company will thoroughly review your finances with you and make sure this is something that you can budget, as well as fully clarify to you both the benefits and drawbacks of doing this. And let you make the conscience choice as to whether this is the best charge card debt reduction method for your state of affairs.

Another extremely effective way to evaluate a company is to make sure they are registered with the BBB (Better Business Bureau) and that they are in good standings with a very little amount of complaints. And if there are complaints make sure they were resolved to the clients liking.

If you do not want to use a financial help company, you can always call your bank. The best charge card companies to deal with in financial hardship situations are Discover cards and Chase cards.

Pay Off Your Debt Without Ruining Your Credit Rating

There are lots of ways to eliminate your charge card debt. You could declare credit card companyruptcy, you could call one of those “secrets the credit card account companies don’t want you to know” places and really destroy your credit rating, or, you could follow my simple plan for paying off all your charge cards, while actually improving your credit score.

Now the plan is simple, but it is not easy. To make it work you are going to need to exercise a large amount of self control, and be committed to paying off your credit card debt.

Paying off your debt is going to have to become more important to you than having the latest car, the biggest house, or even the nicest shoes. In some cases, to pay off your debt you are going to need to make some sacrifices in your style of living.And it won’t happen overnight.

Paying off your charge card debt is a lot of hard work, but the rewards are outstanding. If you follow my plan, not only will you pay off your credit card accounts, at the same time you will be building an emergency fund savings account. Imagine how it will feel to be debt free, and with money in the bank. Imagine not needing to worry if your car needs repair. Imagine what it would be like to on a first class vacation, and not have to worry about paying the bills when you get home.

I know what I am talking about. There was a time when I had almost $30,000 in charge card account debt. Plus a mortgage! 5 years ago I paid off my last debt, and I have lived debt free ever since. But that does not mean I am living the frugal life. Before I paid off my debt I was paying almost $2,000 per month in interest alone! (That included my mortgage, which I also paid off.) Paying off that much debt freed up a bunch of cash each month. Since I have become debt free I have taken a two week first class vacation to Belize, and paid cash! I have bought a car, with cash, and I have enough in savings that I will be OK for a long time if I happen to lose my job.

Now normally this would be the place where I would tell you to buy my book, or sign up for my seminar, but that is not what I am going to do! Keep reading and I will tell you exactly what you need to do to pay off all your debt and become debt free.

Step Number 1- Find Out Exactly How Much You Owe On Your Credit Cards

Get all your charge card statements together, and then using either a spreadsheet, or just a piece of paper, across the top create the following categories.Credit Card Name, Total Amount Owed, Interest Rate, Minimum Payment. Now using your credit card account statements fill out the worksheet for every charge card that you are carrying a balance on. Then add up the total amount owed, and the total minimum payment. Take a moment to just look at these numbers. Look at the minimum payment amount. What could you do with that amount of money if you didn’t have to send it to your credit cards? Now look at at the total amount due. Don’t worry about how big the number is, don’t feel guilty about running up that much debt. But do accept that this is the amount of debt you have, and that you are committed to getting rid of it.

Step 2 – What to Do When You Can’t Pay the Minimum Payments On Your Credit Card

Now go back to that minimum payment amount. If you regularly pay more than the minimum payment, I will get back to you in just a minute. But keep reading if you want to really accelerate paying off your charge cards. If you can’t pay more than your minimum payment, or if you are not able to pay even the minimum payments on your charge card account. Listen UP! You are spending more than you earn. As long as you spend more than you earn, you will only get deeper and deeper in debt. And it will only get harder and harder to get it all paid off. Starting immediately you need to spend less, and make more. Personally I find spending less quite a bit easier than earning more. But I will be writing more hubs later that deal with both of these topics in more detail.

But for now, first look to where you can cut back on spending. You may think that you have cut back as much as you can, but I can almost bet you have not. Sometimes it takes drastic measures to make a real dent in your spending. Taking your lunch to work and passing on the daily latte will certainly help, but here are a couple ideas that will turbo charge your efforts to get your charge card debts paid off.

Consider selling your car and using public transportation. If you are making payments on your car, this might be all you need to get on the fast track for paying off your credit cards. Just make sure you can sell your car for enough to pay off the entire debt.
The second big step you can take to increase your income without taking another job is to consider taking in a roommate. In my area you can rent a room in your house for $500 per month. Once again, think about how quickly you could pay off your credit cards if you paid an extra $500 per month.

Step 3 – Paying Off Your Credit Cards, Have a Plan

Pull out your spreadsheet and take another look at your minimum payment. Now decide how much extra you can put towards paying off your credit card accounts.If you can’t come up with an extra amount, then go back and read the previous paragraphs. For the plan to work in a reasonable amount of time, you need to be able to pay more than the minimum payment. Decide which charge card you would like to pay off first. Some people like to pay off the card with the highest APR. That makes sense, because in the long run you will pay less in interest. Some people like to pay off the card with the lowest balance first. That way they will have the satisfaction of getting a card paid off in the quickest amount of time. Either way is fine with me, as long as you pick just one card that you want to pay off first, and stick with the decision.As you pay off each card, you will roll over the total payment into the next card you want to pay off.

For all of your credit card accounts except one, you are going to pay just the minimum payment…no more! This starting minimum payment is the payment you are going to make until the card is paid off. Over time, your minimum payment will go down, but the amount you pay on the card will not.

Now lets take a look at your extra payment amount. If it is under $12 take half of it and make that the additional payment on the card you are paying off first. That is right, I said half. Even if it is only $1. The other half of your extra payment amount you are to deposit in an emergency only savings account. Even if it is only $1. Now I know that most credit card companys will not open a savings account for only a dollar. Get creative, you don’t need to keep the cash at a bank, but you do need to put it aside to be used only for emergencies. And I mean real emergencies. You biggest priority right now is to pay off your debt. Your emergency fund is to be used only for things you literally can’t live without. If your extra payment amount is $12 or more, I want to you split it in thirds. One third to paying off your debt, one third to your emergency savings account, and one third to fun cash.

Step 4 – Automate Your Credit Card Payments

Now that you know exactly how much you will be paying on your credit cards each month, you can set up your payments so they happen automatically. Most credit card companys will let you do this through online lendering, or you can contact your credit card account company and they will set you with an automatic payment plan. With all your payments on auto pilot, you won’t be late making a payment, and you won’t be tempted to skip a payment. You just need to be sure that you have enough in the credit card company to cover your payments.

Step 5 – Pay Cash for Everything

Let me tell you about a very difficult day in my life. I had committed to paying off my credit card account debt, and that meant not charging anything. How can you pay off your debt if you are continually adding to it? I was in the middle of putting in an above ground pool. It was May and the days were beginning to get warm. I couldn’t wait for my pool to be done so I could enjoy it. But on this particular day I realized that I needed some extra parts for the pool. I didn’t have the cash for it. I knew it could take weeks to save up the cash for the parts, weeks that I could be swimming in my new pool. I am happy to say that I stuck to my plan. I made an extra effort to cut costs, and I did various odd jobs that I could find to bring in more money. In two weeks I had saved enough to buy what I needed to finish the pool, without adding to my charge card debt.

Paying cash for everything is the hardest part of the plan, and the most important. As the old saying goes, if you want to get out of the hole, quit digging! This was the most challenging part for me and for most people. But once you get in the habit of paying with cash or doing without, you wil find that it gets easier and easier. Plus you will be getting the satisfaction of watching your credit card balances go down for a change.

The Final Step To Becoming Debt Free

Every once and again, most people will have a time when some extra cash comes into the house. It could be a tax refund, a raise a work, even an inheritance you didn’t know was coming. Whenever that happens, just apply the one third rule. One third goes to paying off debt, one third goes to emergency savings, and one third goes to fun money.

A funny thing starts to happen as you learn to live on a cash basis, and as you watch your credit card account balances decline. You start to enjoy living within your means. You find that you are stressing less about money, and you might actually find yourself feeling sorry for the people with lots of expensive “stuff” that they bought with debt.

And when the day comes when you finally pay off that last credit card, you will have a huge sense of satisfaction, knowing that you have done what many people attempt, but few actually do.

Also, if you are looking for a balance transfer credit card to bring interest down, www.1-2-3-creditcards.com has the best charge card offers. I would advise starting with Discover credit cards or Chase credit cards.