Credit Card Debt Help/advice

I am not sure what your debt is, but I can only tell you our story, we had about $10,000 in credit card debt, the collection calls were depressing me and we were going to file bankupcy. We were advised that since the debt wasn't that high to try to pay it off than ruin our credit. We got in touch with a mortgage broker and just asked what is the best thing to do or any recommendations (we lived in an apt. so no refinancing or anything) he gave us a name of a consolidation company, we have been in the program for over 2 years and are less than a year to go. The company doesn't settle your accounts but rather, gets them to lower the interest rate and negotiates a monthly payments, we have to pay the consolidation co. about $42 a month for the service along with what goes to the companies. I know what your saying "why not do it yourself and keep the $42" because if I left it up to myself I wouldn't keep up with the payments, that is how we go into this mess in the first place. When we were looking into consolidation places I almost fell for one of the "scams" you put money into an account each month, they take their monthly fee and when you saved enough money they call, or was it you call make the deal and pay it. The problem with this is that while you are saving, you aren't paying anything on the bill and they can take you to court and get judgements against you. Those don't work. We pay our consolidation once a month they make the payments from the money we sent, and you still continue to receive statments from you credit cards so that you know they are getting paid. The downside to this is that you have to close any accounts you put in the program and are not allowed to open any lines of credit until you are done with the program (exceptions are buying a house or a car, or if any medical situation arises). If you want the name of the company I would be happy to provide it, please let me know. They are not all bad, it is just finding a legitimate one that is hard. Good luck to you.

I should add that since we started this and have been in the program a while, we just bought our first house in June and are well on our way of being debt free. In a way it does look bad on your credit report, like you are in bancrupcy, but we have paperwork showing that is not the case we just needed to prove everything when we went for our loan.

How is your FICO and credit history? Do you just have one card? One option might be to refinance your house and include the credit card debt, so you can pay it off. Of course, refinancing is a pain and it usually costs a couple thousand in closing costs, but those can be married into the new home loan.

I am someone who never lives in debt - I use my credit card for monthly expenses/convenience and pay it off. I have had old cars that I've driven a long time (it's cheaper to repair an old car than to pay payments for a new one). I don't live beyond my means - period. I am single and paid my way through college, bought two homes, gone through fertility treatments and am now adopting - all on a single person's salary of less than $55K. So I'm going to give you some ideas.

I would encourage you NOT to file bankruptcy. If you need more money there are only two things to do: bring in more money or cut expenses. Are you doing everything you can to make more money - even if it's in the short term? You could:

-take a part time job.
-think of something you can do from home to make $
- Think of all of your skills - babysitting, cooking, sewing, bartending, canning, list them all - then think about how you could put them to use. Tell EVERYONE you know that you are looking for some extra $ and are willing to help them with whatever your skills are - cleaning, yardwork, whatever. You never know who might need an extra hand. Heck, even babysitters are making $10-$12!
-sell things on ebay or craigs list. Do you have stuff in your closets you're not using - or something you thought you'd want that you never used. Seriously, look at everything in your house. If it doesn't serve a useful purpose or have special meaning, consider selling it.
- have a garage sale and make bake goods to sell there also. Ask if any friends have things they'd be willing to donate to sell at your sale - or maybe you'll sell it for a portion of the proceeds. So they get 50 percent, you get 50 percent.
- tell family that rather than have gifts, you'd appreciate a gift card to wal-mart or the grocery store and use the money you would have spent to put on your credit card

You also need to cut back costs. I highly recommend you go to www.frugalvillage.com and check out tips there for frugal living - but here are some:

- no junk food, etc. you don't need that.
- use coupons
- cut your cable
-check to see you are using the cheapest phone plan possible (if you have a home and cell do you need both? You could perhaps get a pay as you go cell phone where you pay $20 for three months and only use it when necessary/emergencies)
- don't eat out at all. One day a week cook a bunch of stuff. Homemade is cheaper and better for you.
- Ask all your friends and acquaintances if they have any extra fruit/veggies right now from their trees/gardens. Freeze or can stuff to use for breads, sauces, etc. all winter.
- find free activities to do - hikes in the woods, a bbq at home, a potluck with friends.
- Tell EVERYONE - and I mean EVERYONE - that you are having some very tight times financially and you have to cut back - so when people at work ask you to go to lunch, friends ask to go to dinner, etc., you can just say lightheartedly, sorry, just can't do it right now I'm on the "spent too much this year" budget - say it with a wink and they'll get the picture. It's very freeing to let everyone you know (you can give more details to close family friends) that you are broke and in debt. Most likely, people will either come to your aid or confide in your their issues also.
- don't spend one penny on gifts - nope not one cent. You can give a card that says, we are giving you the gift of XX activity - i.e. we'll babysit or take you hiking or play board games with you. If you have to give something, make something cheap and homemade. Or just put an IOU in a card. I gave my friend a card for her shower that said, so excited for your new little one. I look forward to giving him something special when things turn around for me financially - she was a good friend and totally understood.
- If you feel like you have to give a gift - use www.freecycle.org. I freecycled the last two Xmases and birthdays for all of my nieces/nephews and cousins kids. People give away tons of stuff on freecycle - I recently got two boxes of kids books ages toddler - 12. I will be giving everyone books for Xmas. My family knows what I've been going through and I don't try to pass things off as new, although many are new or in like new condition. The kids don't know and don't care.

Hope this helps.

Good for you wanting to dig yourself out of the credit card hole! No latter what method you want to use to gain control of your debt, whether you do it on your own or follow the plans of a financial guru, my suggestion is to first call your credit card, explain your situation, and ask if they can help you out and lower your interest rate. It really helps if you tell them you won't be able to pay the next bill at all if they don't lower the rate. My credit card company (Chase) was more than willing to help, closed the two cards I had (which is fine because I was no longer using them anyway), dramatically lowered to a fixed rate, and put me on a payment plan - I pay the same amount every month (or more if I choose) until the cards are paid off. There are no late fees (though they only allow so many late payments), or any other fees. Now it's as if I'm repaying a five-year loan. Yeah, I'm mad at myself for having gotten into the situation in the first place, but I feel loads better now that I'm doing something about it. And there is a sense of freedom having those cards closed, and there's no temptation at all to "just charge it" because I have no cards to charge!
However some credit card companies will not be willing to work with you at all. It's surprising really, to find out which ones. My husband tried to get on the same type of plan with his Capitol One card when his rate inexplicably shot up, or even just get his rate reduced, but they told him he was out of luck. Even when he used the "but I won't be able to pay" line, they basically said 'too bad.' Thank goodness we CAN pay it, but if we couldn't, we'd be sunk. At the end of the call, he said, "I guess I know what's in MY wallet!"

And that leads me to the reason why I had multiple cards in the first place - transferring balances. Often when you get the offers for the introductory rates, the card company has the option to transfer the whole balance you request, or just a portion. In my case, they only transferred a portion. So when the next low interest offer came along, I transferred the remaining balance. Then when that interest rate went up, I did it all again. One card can easily multiply! Then you're faced with three monthly payments instead of one.

And when you get the offers for the 0% interest rate, it's really tempting to take it. But my advice is, don't! Unless you think you can be disciplined enough to really pay off that balance within the introductory period - if not, don't do it. That rate will shoot up, and even if you know it's coming, that extra interest tacked onto your bill each month can be a shock and a strain.

No matter how great they sound, I don't recommend a consolidation company. Personally, I would have trouble trusting a third party, unless it was my own bank. The consolidation companies or "debt management agencies" claim to "work" with your creditors while you pay them directly, but really they just take your money and you're still suck with the debt to the credit card company. Sad, isn't it? Here's more info: http://credit.about.com/od/debtmanagementsolutions/tp/deb... . There maybe a few legitimate companies out there, but to me the risk is too high. And from what I've heard from people who have consolidated, just doing so ruins your credit for at least seven years. I'd say if you can manage it on your own, you're better off.

No matter what way you choose to go, good luck to you! Good luck to us both! Ha ha!

Hi,
I acculmulated quite a bit of debt with a wedding, honeymoon and 2 kids in less than 4 years. I was able to get a credit line with Discover to consolidate the credit card debt with one monthly payment for 7 years (25,000 at 10.0 % interest rate). I realize it's not the best interest rate but it's better than what the credit card debt would have accumulated. Unfortunately, now my husband is on a commission only salary and is not bringing in an income. We have been using a 0% card and paying the minimum amount. When we get our income tax refund next year we will pay down that card as much as we can before the interest rate changes. I hate to do it, but I don't know what else to do. I suppose there is always the IRA we could cash out, but with huge penalties. I work full-time as a physical therapist and couldn't possibly add any more hours without missing my family even more. Hopefully, with the economy improving my husband will start bringing in some commissions and things will work out. I hope the advice helps or at least helps you see that you are not alone! Good luck!

I too would suggest Dave Ramsey. If you live in Lake County he is on the radio at 1220 am from 1-4. His Total Money Makeover book changed our entire way we look at money. And as a matter of fact after 8 months of really paying attention to every dollar, we just paid off our last credit card. And it is all because of Dave.
Credit card companies won't settle with you unless you are 6 months or more behind on payments. Then you have to get the settlement amount in writing and pay them the total amount in one payment. And even though you pay them off they still destroy your credit.
Good luck to you. And don't be to hard on yourself, we have all done really dumb things with money. The important thing is that you are willing to change. Our kids ages 21 and 8 have been a part of what we have been doing since the start(my son the 21 year old actually bought me the book for Christmas)and the great thing is..they now understand what it is like to change the way you use money. A gift my parents never gave me. We now have shared the book with at least 4 people and all of them are on the plan and it works beautifully. Good luck to you!!!!

I saw a special on HLN Clark Howard about how to call the companies and what specifically to say. He said DO NOT use a consolidation company you can do it yourself but that you need to know the right terminology. Google Clark Howard and maybe he still has some info on his website. Good Luck.

I tried a debt settlement company and all they did was take my money and the settlement amounts weren't anything I could do. They wanted 3 payments of $3000 over 3 months. If I had an extra $3000 a month I wouldn't have been in debt trouble!

The companies want all their money over a 3 month period or so with debt settlement. For a smaller amount owed you could settle and be able to make the payments. It does appear on your credit report "settled as agreed" not "paid in full."

My suggestion is go with a company that helps freeze your interest rates and then helps you pay it off. I don't think debt settlement is the way to go.

I am training in the insurance and financial services industry as we speak. Although I'm in training, my company offers great solutions for this problem specifically. We are NOT a debt consolidation company - meaning we will not negotiate with your credit card companies for a lower payoff amount (which is really not in your best interest anyway). But we do have practicle solutions to your problem. Our consultation is completely FREE and NO OBLIGATION. You can take it our ideas or leave them.

But here's what I do know - You can settle with your credit cards yourself but it will count against you on your credit report. It will be marked "account settlement" on your report meaning that when you want to get financing for something, that will definitely hinder you. The creditor will see you had a balance that was not paid in full and the account was closed. Also, when you do this, the account is permanently closed. You will never be able to re-open it and if you want a credit line from that creditor in the next 10 years, say a Chase endorsed card, you will likely be unable to do so.

The idea someone had about getting a 0% interest credit card is a good one but there are many problems with this plan. Likely because of your existing financial situation, you may not qualify for one. So that means you can transfer to a credit card and consolidate but it will have interest and the interest rates change frequently. Usually they send you a too long to read notification of it and the next thing you know your interest rate when from 3% to 12% and you didn't even realize. Also, getting another credit card to help with debt is not a solution at all. You're acquiring more debt for the sake of debt - doesn't make a lot of sense. Plus it takes an insurmountable amount of discipline to actually pay off this new debt you've created to get rid of old debt. And because if something arises like your car needs new tires or you want to take a vacation, it's very easy to only pay the minimum amount due. If you do this, you will be paying this debt for decades - no joke.

However, there are options out there that don't require you to take a loan or close all your accounts. I cannot do your analysis yet because like I mentioned, I'm in training. But I would be happy to get you in touch with someone. Again, it's free and no obligation. The worst thing you can do is go to a bank for advice or to a credit "counselor". They always sound like they have good ideas but it's only in their best interest - NOT yours. Even if you don't contact me, please keep that in mind. Be in touch if I can help!

PS - here's an example of what I'm talking about. Take out a home equity loan but instead of directly paying off debt with it, put it into a high interest yielding account. As you earn on this account, use it to pay off the debt and repay the home equity loan you took to get it in the first place. This is a very smart way to pay off debt and there are a lot of options like this instead of using credit cards or consolidation.

Most credit card companies will not work directly with you but they will work with a bill consolidation company. Try contacting a bill consolidation company and see what they can do for you. The reason most credit card companies will not work directly with you is because they are getting interest from you, they could care less if you just pay the minimum, in fact that is what they like to see. They less you pay them the more interest you get from you. And if you don't make the minimum they get late fees. More money for them.
Another thing you could do is look into filling bankruptcy. I know you probably want to try other things before doing that but sometimes that is the only answer to getting out of debt.
Lastly you can just take your credit card and put it away so you will not use it and just slowly pay off you debt. it may take a while but one day it will be all gone. The big thing is don't use the card any more. If you can't afford to pay cash you don't need it.

S..

Dave Ramsey has great advice, check him out. But no I haven't tried to settle, but it's worth a try!

L.,
We had acquire a large amount on credit cards as well due to my husband schooling and what we did was (if possible for you) transfer it to a 0% interest credit card for at least 12 months, with a 3% transfer fee. (if 0% not possible, at least try to get something that is 3% interest so you don't pay as much). This way you are only paying interest on the transfer fee and all the money you pay goes into your debt. Another thing will be call the cc company and ask them to lower your rate - you will have to tell them you want to cancel first so they take you seriously (don't cancel - of course).
I have heard about consolidation companies, but I have never tried them. If you do, please ask them if this will ruin your credit or make you look like you defaulted becuase if this is the case, ALL your debt will go to a default rate - you do NOT want this. Ask them how will this impact your credit and other debt!
To find a good consolidation company, go to crownfinancial.org. They look out for your best.
I hope this helps. Wish you the best!

You can call the credit card companies yourself and try to lower your interest rate. Tell them you are having a hard time financially and ask how much can they lower your interest by. Good luck and I think majority of people have had to deal with high credit card balalnces.

I recommend that you read The Total Money Make Over by Dave Ramsy. It is an easy way to get out of debt without ruining your credit. It helps you budget your money and see where it is going, it also helps you save it you follow it.