Credit card debt is undoubtedly one of the major financial problems in the world, and especially in the United States of America where many people are having some form of trouble with this type of financial obligation. In case you are reading this, you are probably also one of those people who is experiencing difficulties with credit card financial obligations.
The first thing that you need to acknowledge is the sole fact that you are reading this. That alone means that you are ready to take some action. And of course, it is hard to see anything positive in life when you are struggling with credit card financial obligations. Regardless of whatever hopes and dreams you have for the future, probably none of them will ever turn into reality unless you free yourself from the financial burden that you are carrying. That is why it is so important that you are not only ready for the change, but you are ready to make that change come.
In this article, we will try to give you some basic information about your problem and the possible solutions that may be standing in front of you. We will discuss:
- Credit card debt, what it is and why it is so common
- Credit card financial obligation settlement
- How do credit card debt negotiations work
- What are the pros and cons of credit card financial obligations negotiations
- What are the alternatives that you might have not yet tried out
What is the credit card financial obligation and why is it so common in the US?
If you are an adult living in the United States, you probably own a credit card, or maybe several cards. Generally, every purchase that you make with each of your cards could be considered as debt. However, since you are most likely paying your credit card balance at the end of each month, you are actually not allowing these purchases to become financial obligations, as by paying off your balances every month you are preventing them from generating interest. Still, once your unpaid balances start to generate interest, that means that you are carrying credit card debt. Many studies show that the average American household is carrying more than $15,000 on credit card financial obligations alone. That can give you a good idea of just how big of an issue this is in our modern society.
What is credit card financial obligations negotiation?
There are numerous credit card companies and most of them have the same priorities. Their main priority, of course, is to generate a certain amount of income. Once it is clear to a credit card company that some of its consumers is no longer able to make the payments on his on her credit card balance, the priorities of the credit card company or the bank that owes it becomes quite different.
Instead of looking to make continuous income from you for as long as possible, in such situation what credit cards are often willing to do is to get as much as they can from you all at once and closing your account. This is where the credit card negotiation comes in. A credit card settlement is an offer that you make to your credit card company to settle the overall amount of money that you owe to that company for a lesser sum. If your credit card company agrees to the payment that you are offering, you will have to pay the entire amount all at once, with a single lump sum.
Pros and cons of settling your credit card financial obligations
One way to figure out whether this is the right option for you and your financial future is to evaluate the pros and the cons that it offers.
Credit card debt negotiation pros
By settling your credit card financial obligations you would be paying a lesser sum than if you would have to normally repay your credit card financial obligations. Also, when you pay off all that you owe with a single payment, that means you would not be paying any more money on interest, and after all, settling your financial obligations means that you would be paying less than the amount you actually owe, which can never be a bad thing.
- The service of credit card financial obligation settlement is less harmful compared to what declaring bankruptcy could do to the state of your credit score.
Credit card financial obligations settlement cons
Like with most things in the financial world, this service has its downsides too.
Settling your debt could be quite risky for your financial situation
In order to make your credit card financial obligations settlement lump sum payment, you would have to save a certain amount of money. In order to do so, you would probably have to stop making payments on your credit card balances. If you are not working with a credit card company that operates in good faith, that company may use this as a chance to see you in collections, garnish your bank accounts and wages. Whether you have notified your creditor that you intend to settle your financial obligations, the credit card company is in its legal rights to start the collecting process.
Using the services of a financial obligations settlement company for your credit card debt negotiations might be even riskier
What these companies do is basically negotiating with your creditors on your behalf, trying to reach an agreement for settling your financial obligations. In the process of settling, you stop making any payments to your credit card company and you are instead making payments to your financial obligations settlement company, which payments are kept in a new account. Once the funds in this account reach the needed amount, the financial obligations settlement company uses this amount to pay off what you owe to your creditors. While most of this sounds good, you need to be aware that nowadays, there are numerous financial obligations settlement companies that are not operating in good faith and are practically scamming people.
Credit card financial obligations settlement alternatives
If you are having a real struggle with the repayment of your credit card financial obligations and you believe that settling is your only way out but you have not really tried out some financial methods and tools for dealing with such problems, you might want to do that before going for a settlement.
There are various ways that you could pay off your credit card balances. You can try out some repayment approaches like the snowball repayment method. You can try to consolidate your credit cards into a single monthly payment with a debt consolidation loan or a credit card balance transfer. You can change your lifestyle, adjust it as much as you can to your current financial situation. Try getting some extra income by finding a second job. Make sure that you do all that you can to repay what you owe before you consider settling your credit card financial obligations.