What Is Credit Card Debt Relief?
If you’re dealing with stress from rising credit card balances, you’re probably seeking the fastest form of relief possible. While fast results are appealing, it’s important to keep in mind there are a wide array of options available for getting relief from credit card debt and the related financial stress it causes. In this article, we’re going to dig into understanding the basics of credit card debt relief so you can choose the right path to a brighter financial future and become debt-free.
When Should You Consider Debt Relief?
The problem with credit card debt is that it builds quickly. The reason for this is that the debt is structured as revolving debt, meaning you’re charged on whatever the balance is at the end of the billing cycle. Because of this, you wind up being charged interest on any interest charges from the month before when you let the balance roll over.
Once the negative cycle of rising credit card balances starts, it can be hard to escape from because your balances go up even if you aren’t making purchases with them anymore. Unless you pay more than the interest charges for each month, you’ll never pay down the balance.
The kicker is the minimum monthly payment the credit card company requires is usually less than the interest charges for the month. In essence, if you pay only the minimum each month, your balance will eventually build to the point that your credit card is maxed out.
If you’ve found yourself in this type of situation with multiple credit cards and are struggling to bring things back on track, the good news is there are many forms of credit card debt relief available. Next, we will cover each type of debt relief so you can understand your options more clearly.
What Are the Different Forms of Credit Card Debt Relief?
Thankfully, for those who need relief from credit card debt, there are numerous options available. That said, it’s crucial to do some research to understand which form of credit card debt relief is the best move for you financially not just in the short-term, but the long-term as well. Let’s run down the list of each type of debt relief for growing credit card balances from easiest to hardest to get started with.
Call And Negotiate With The Credit Card Company
The first place to start when seeking credit card debt relief is calling up the credit card company to try and negotiate better terms for the debt to be manageable for you again. Credit card companies would rather keep you as a customer, so you can keep using their card (they earn from merchant fees, keep that in mind). Let them know you’d like to remain a loyal customer and that you just need to rework things to maintain a positive business relationship.
Some credit card companies will offer debt relief like lower interest rates, lower minimum payments, removing or reducing fees and penalties, or even a fixed payment schedule. It doesn’t cost you anything to ask, so this is the smartest place to start when you still have decent credit and haven’t fallen too far behind on payments.
Debt Management
Credit counselors can help you get on a debt management program, sometimes referred to as a debt management plan. Usually, debt management plans are designed to help you pay off your debt in full over a set period of time.
The credit counselor may negotiate directly with your creditors on your behalf to get the creditors to agree to waiving fees or lowering your interest rates.
Sometimes with a debt management plan, you may only have to make one payment every month to the credit counselor, who then sends the money directly to each of your creditors.
Debt Settlement
Debt settlement for relief from credit card debts sometimes involves lengthy debt settlement negotiations with your creditors. During this process, you’ll work with a debt settlement company to establish a settlement structure that works for your budget, then the company negotiates on your behalf for a reduction of the balances.
Bankruptcy
Bankruptcy is the most aggressive form of debt relief, and in most cases should be reserved for only severe financial circumstances where future income is unlikely or likely to go down. There are two kinds of bankruptcy for individuals—Chapter 7 and Chapter 13. Every aspect of your financial situation will be used to determine which type you qualify to file for with the court system.
Just remember—bankruptcy doesn’t always discharge every debt. Some forms of debt, such as student loans, are often ineligible for bankruptcy discharge. Finally, keep in mind it’s up to the bankruptcy courts to decide how much of your debt gets eliminated.
Are There Drawbacks To Seeking Credit Card Debt Relief?
While the idea of getting relief from high credit card debt can seem attractive, nearly all forms of it come with some drawbacks.
Debt Relief Is Rarely Free
Credit card debt relief can sometimes cost money, especially when you’re taking measures to slash your balances. Even taking out a personal loan to pay off credit card debt can result in origination fees and interest charges.
When it comes to declaring bankruptcy, you could face court costs and legal fees, along with higher interest rates for the next ten years. Even nonprofit organizations and credit counselors charge fees for their services. So just be sure to balance the costs with the savings.
Will Debt Relief Impact Your Credit Score?
More aggressive forms of debt relief, such as debt settlement and bankruptcy, can affect your credit for years. While these methods can dramatically reduce your debt payments each month, their effect on credit should be considered carefully.
Reach Out to Us for Debt Settlement Options
When the stress of rising credit card balances and payments is finally too much, Alleviate Financial is here to help. Contact our expert debt relief team today and have us examine your entire financial picture to help you come up with a plan that will benefit you long term.
Our debt relief specialists take the time to learn your financial situation to craft the best debt relief plan for your financial future. Contact us today!
