Credit Card Debt Management Vis-a-Vis Debt Settlement

Credit Card Debt Management - A Way Out Of The Debt Pit

It is convenient to use credit cards when paying for bills, for shopping, and for other goods.  What we don’t realize is that the more we misuse these plastics, the more we drown ourselves in debt.  If it is not used properly or wisely, it can really lead you to trouble and facing your credit card company when you can no longer pay for your debts can be tough.  In case you are already drowning in credit card debt,  there is still a solution to get out of it.  There are two ways you can use to tackle credit card debts - through Credit Card Debt Management or Credit Card Debt Settlement.

Credit Card Debt Management vs. Credit Card Debt Settlement

A credit card debt management program provides a structured repayment schedule that allows the borrower to repay financial obligations earlier than he may be capable  of doing. This is made possible through benefits like reduction of interest rates and waiving fees. Using this approach can save you money and time. In many cases, this can also protect your credit rating with this method since and may even get better as you progress in the program as long as you pay on time and regularly.  Also, you don’t need to pay all your creditors separately with this program.  This will allow you to make a single monthly payment to all your creditors and your debt management service provider will distribute the payments on your behalf.  You can keep track of your debt management account activities and balances through the monthly statement that your debt management service provider will furnish you with which you can use to evaluate your actual progress.

Unlike credit card debt management, debt settlement is a much risky method of getting out of debt, although superficially it sound safe enough. With debt settlement, you pay the debt settlement firm. Then this firm pays your creditors. So the expected ending is that everyone gets paid and the debtor is relieved from his financial obligations and can start anew. However, since creditors usually wait for debtors to be  a few months behind payments before they settle debts. So you have to suspend making payments for a few months. This delinquency is disclosed to the credit bureaus, causing your credit rating to take a dive and credit collectors may start calling you. Your delinquency will continue to be reflected on your credit report for as long as seven years. This may give you a hard time obtaining new credit cards and loans and even affect your ability to land in a job or get a good insurance rate, unless you can earn some positive information that can cover up for the negative feedback. When the debt settlement company fully pays your creditors, this is not necessarily considered as positive information since the your delinquency record is not deleted. The settlement is reflected only as “Charged-Off Settled” or Paid-Settled”. The update you would want to reflect on your record is “Paid in Full.” You may also be liable to pay taxes for debt settlement.

Deciding For The Best Pick

Your case may be different from the others. Debt settlement may work for others but not for your case, or credit card debt management may not benefit you, but may benefit others. It is best to seek advice from experts. Debt settlement does not work for people who are current on their accounts. It will just ruin their credit score.

In many cases, credit card debt management is more beneficial than debt settlement especially for debtors who are current on their accounts and do not have too much debt making them still afford to religiously pay monthly.