Credit Card Settlement

Settlement Options

Non-Profit Settlement

Before you go calling the first non-profit settlement company you hear about, do a little research first. Sure, it sounds good to hear that a company really cares about you and wants to help you get out of debt. Unfortunately, not all non-profit settlement companies are created equal. Always check a company out first, and begin with the Better Business Bureau. The last thing you need is to get involved with a company that gladly takes your money but doesn't forward it in a timely manner to your creditors. Another drawback is they charge large application fees to clients before they will accept them into their programs.

One company with a good track record in helping individuals resolve their debt is the Consumer Credit Counseling Service. They are located in most major cities and they don't charge acceptance fees to clients who use their services. Most credit card companies are happy to do business with CCCS because they make on-time payments to creditors.

Loans

Whether you mortgage your home or take out a personal loan, both options are low-interest options to settling your credit card accounts. Many credit card companies will advise you to try this option if you have found yourself drowning in credit card debt. Unfortunately, if you are heavily in debt, it may be difficult to take out a loan, especially if your credit report is looking poor.

Bankruptcy

The last resort in settling accounts you are unable to pay is filing for bankruptcy. It is becoming more difficult to file bankruptcy though, especially if you are doing it solely to erase credit card debt. Depending on the state you reside in, the laws may make it difficult to file if your income is well above the poverty line. Consider your other options first before you consider bankruptcy. Speaking with a bankruptcy lawyer can help you weigh the pros and cons of taking this drastic step which will affect your credit report for the next seven to ten years.

Do-it-Yourself Credit Card Settlement

One option that few exercise is the do-it-yourself credit card settlement. If you don't like confrontations, this may not be a good option for you. This type of settlement requires you to get in the trenches with collectors, which often gets a little dicey. If your account has already been charged off (meaning it went 6 months without being paid at all), settling your account can be a great money-saving option. Settling your account requires you to know exactly what your account balance is and what you are willing to pay either in a lump sum or over a period of 3-4 months. Most creditors will settle an account for 60 percent of the total amount due. Always start out negotiating for 40 percent off the balance, but don't go below 30 percent. Your goal is to eliminate all past due charges, finance charges and over the limit charges from the total balance. If the creditor won't negotiate, politely decline and wait a few weeks; odds are they will send you a letter with a better settlement offer. It may also help to speak directly with a collection supervisor since it is in his or her best interest to settle as many accounts as possible.

Conclusion

A credit card settlement exists that fits your budget and current situation. Don't take the first settlement offer you receive unless it is between 30 to 40 percent off the current balance. Consider a non-profit agency to help you settle your debts before you consider filing for bankruptcy. Non-profit agencies can help you settle your debts and restore your credit rating. Loans are also an option for settling your credit card debt. However, be sure that you can afford the new loan payment before you sign on the dotted line.