Take advantage of the help that’s right there on your credit card bill
Very few debt-laden consumers seem to be taking advantage of the free help being offered on their credit card statements.
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 was signed into law by President Obama in an attempt to help consumers break the cycle of credit card debt.
The Credit CARD Act not only requires statements to provide important information in “plain language that is in plain sight” but to include toll-free telephone numbers for nonprofit credit counselors.
Yet few consumers are reaching out for assistance in managing debt.
According to a recent story by the Associated Press, “the National Foundation for Credit Counseling says its member agencies received a mere 150,000 calls from credit card statements. That's despite the phone numbers having been printed on 500 million statements since February of last year.”
Why consumers are not reaching out for help in managing debt is anyone's guess.
Perhaps they’re unaware of how good credit counseling works or fear repercussions of using debt-relief services.
Counselors who work at NFCC-affiliated agencies start by reviewing each client’s financial situation.
How much do you make? How much do you owe? And to whom?
Those counselors can often come up with a plan to you get out of debt just by spending a little less and directing that savings toward your bills.
Consumers who are in more trouble than that may need what’s called a debt management plan.
A DMP allows the credit counselor to negotiate a repayment plan with your creditors that you can afford and will have you debt free in two to three years.
Those counselors can usually get credit cards to waive late fees and penalties and write off a portion of your debt – typically about half of what you owe.
Once new terms are agreed upon, consumers make one monthly payment to the credit counseling agency, which distributes payments to individual creditors per the debt management plan.
The fees are minimal if you work with an NFCC credit counselor and there’s only one small drawback to using a DMP.
Anytime a debt – or even part of a debt – is written off, it shows up as a black mark on your credit report.
Access to new unsecured lines of credit while participating in the plan may be restricted.
But that’s not a good reason not to seek professional help if you’re drowning in debt.
Your credit history is a mess already, right? How much worse can a DMP possibly make it?
Answer: Not much.
Find the credit counseling number on your next credit card bill and pick up the phone.
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