If you are drowning in a sea of debt it can seem very difficult to survive. It is easy to grasp at any life preserver that is thrown in your direction. Along comes credit card settlement programs. Are they really a good tool, or just another scam out to separate people from their money?
Like anything, there are a lot of pros and cons of credit card settlement programs. There is misinformation out there that needs to be cleared up to fully understand credit card settlement.
♦ Learn about debt negotiation
Debt negotiation is usually when a third part speaks on behalf of the debtor to the loaner. They act as an arbitrator and try to work out a deal where the amount of debt will be reduced. If there are reasons that you have been unable to make full payments and will continue to be unable to make full payments without some form of debt relief, they can often be quite successful.
♦ The cons of credit card settlement programs
Of course there are drawbacks to this. For one thing, there are often fees involved. The main negative is how it affects your credit rating. Credit negotiations are reported to the credit bureaus. The damage is lesser than continued non-payment would be, but it does hurt your credit score. Additionally if you are settling credit card debt, your account is frozen and the card cannot be used until reauthorized by your lender. If they ever do.
♦ Alternative to credit card settlement programs
Before you jump into settling your debt through negotiation, it is wise to talk to a credit counseling service first. They can help try to create a budget. With a budget you can know if it is feasible to pay off your debts, “as is”. The best way is to pay it off if you can. Proper budgeting may help you do this. If a “painful” budget still cannot dig you out of the mountain of debt, it is time to consider credit consolidation.
♦ The Pros of credit card settlement programs
The pros of credit card settlement programs are all based on how bad your situation is. If it can be managed another way, there are no pros. But if the alternatives are bankruptcy, going to collection or continued non-payment, there are many great pros. Your credit though affected, is hurt less with negotiation than with those other methods. It gives you a means to lower your debt to a reasonable amount over time.
Of all the “bad” responses to out of control debt settlement programs is the “least” of the evils.