When trying to improve your debt situation, paying a fee for anything definitely isn’t going to help you out. These companies that charge a fee to manage your debt aren’t actually doing anything to help you out of your current situation, they are only making it more difficult for you to get yourself out faster.
When I was 18, I found myself racking up my credit cards in order to start up my business, but after September 11th happened, everything had to close down, including my vehicle customization shop. I found myself with loads of debt that I really wasn’t paying on before beyond the minimum. This meant that my cars were all over limit and because I didn’t have enough income to afford to pay enough to get them below limit, the card balances only went up as each over limit fee was charged. I eventually decided that I would call a credit management company. When I did so I had to organize all of the information about my credit and they would attempt to get me better rates. What I ultimately found was that they really didn’t get me better rates, they just created a package that would allow me to make a single payment to them and they would pay all of my bills for me. Sure this made it more convenient, but they were charging me $75/month for this service. After I did the math and realized what was happening, I canceled the service immediately.
What I did learn however was that if I would have just used that $75 extra that I was paying them and paid down the lowest balance credit card one at a time, I could eliminate my debt much faster than they could. As each card was paid down, I would apply the amount that I was paying on that card to the next, and the next would go away faster, and faster, and faster until all of my credit cards were eventually paid off. Using their method, I found that I would be paying on my cards for 10 years before getting out of debt, with my method, I ended up only having to pay on my cards for 5 years. By cutting the time in half, I was able to save myself thousands of dollars in fees and interest and put myself in a better position to obtain credit as I no longer had that burden on my file. If I was still using their program, I would have another 5 years before I would have been able to purchase a house.
Other services say that they can help you get out of debt, but ask you for more money each month than you are currently paying. Using tricky math, they will get you to make your payment 15 days prior to the actual due date of all of your cards, this money will gain interest for them in an account for 15 days, plus they don’t pay on you cards until the absolute latest date possible without getting fee. I found they were getting almost a month of interest benefit from the money. This means that you aren’t really paying your debt off that much faster, but they are making a great deal off of the money that they are holding to pay off these debts.
Realistically, you’ll find that the best method is to just do it yourself and pay off your cards one at a time, starting with the smallest balance first. Eventually you will get ahead and you will be glad that you did it that way, especially after you realize how much money you save.