Credit Card Guide

A Guide to Credit Card Counseling

Credit cards are one of the leading causes of consumer debt. Unfortunately, 2005 bankruptcy reform laws made it harder than ever to reduce credit card debt through bankruptcy. Fortunately, you can still find a way out of debt if you’re committed. Credit counseling can help.

If you’re drowning in debt, you have to stop using your cards. Paying cash is the only way to get a true picture of how and where you spend money. Paying cash also curbs your spending because it feels like “real money.” Once you’ve reduced your spending, you’ll have more money to pay off the debts.

Start by cutting up your credit cards. Then contact your creditors and ask them to reduce your interest rates. You should also consider debt consolidation to further lower your interest rates and streamline your payments.

If that doesn’t help you begin to pay down your debt, then it’s time to get professional help from a credit counseling service.

Professional Credit Card Counseling

When you visit a credit counseling service, don’t expect a magic bullet that will eliminate your debts and allow you to keep spending the way you always have. Instead, you’ll be expected to change your spending habits and work had to pay off your debt. Most counselors will walk you through the following steps:

* Stop using credit cards. You can’t get out of debt while you continue to create new debt.

Hopefully the information presented so far has been applicable. You might also want to consider the following:

* Analyze your income and expenses. As the counselor goes over your budget with you, she’ll recommend places you can cut your spending to free up more money for debt payments. For example, she may suggest cancelling cable, eating out less, driving less, or not buying clothes, accessories, and entertainment products while you work on your debt.

* Create a debt solution. Most counselors will recommend one of three debt solutions: credit card consolidation, debt management, and debt settlement.

* With debt consolidation, the counselor will arrange for a personal or home equity loan that will be used to pay off your other debts. You’ll then have the responsibility of paying off the consolidation loan.

* With a debt management plan, all of your debts will be enrolled in a 2-4 year program. The counselor negotiates with your creditors to lower your interest rates. You then pay the service every month, which distributes the funds appropriately. You’re barred from using the cards or acquiring new debt while in the program.

* With debt settlement, your counselor will negotiate with your creditors to reduce the total balance due. This option is reserved for very serious situations because it will damage your credit history and credit score significantly. There may also be tax implications.

The solution recommended by the debt counselor depends largely on your current income, necessary expenses, and the size of your debt. Try to find the solution with the lowest fees and fastest resolution so that you can get out of debt and move forward with your new-debt free life.

I hope that reading the above information was both enjoyable and educational for you. Your learning process should be ongoing--the more you understand about any subject, the more you will be able to share with others.