If you're having trouble paying off credit card debt, you're not alone. There are plenty of companies out there promising to help, but can they be trusted?
According to NerdWallet, at the end of 2014, the average credit card debt for households that carried a balance was a whopping $15,609. That’s enough to bust nearly any household budget. Fortunately, for those needing help, it’s both easy to find and free.
Here’s this week’s question:
Are there any services available for consumers to use for credit card debt repayment? Ones that are safe and you can trust?
The answer to your first question is simple, Dawn. Yes, there are tons of services that help consumers with credit card debt. The answer to the second question is also yes, but requires a bit more explanation.
Several years ago, a close friend of mine was in debt hell. Because of a bad relationship (her live-in boyfriend refused to work), she was unable to pay her bills. In addition to an overdrawn bank account and maxed-out credit cards, she even owed thousands of dollars on an engagement ring her beau had bought and never paid for. The only solution she could see, other than ending the relationship, was moving back in with her parents until she could regain her financial footing.
I offered another option: credit counseling. It’s something I know a lot about. I’ve covered these services for decades and have sat on the board of two agencies.
A reputable credit counseling agency will put you on a debt management plan (DMP). This means they step between you and your creditors. They’ll make the collection calls stop, help you prepare a repayment plan, possibly get some interest rates reduced and fees eliminated, and offer a specific date when you’ll be debt-free. After entering a DMP, you’ll stop using credit cards and start sending one check monthly to the agency, which they’ll divide into prearranged payments and forward to your creditors.
Credit counseling worked for my friend because she had income — you can’t repay debt without it. Because she had a good job, all she needed was some room to breathe, and credit counseling offered it. Her plan, like most, took just more than four years to complete. Today she’s debt-free, has a nice, fat savings account, and a much better boyfriend.
The vast majority of credit counseling agencies are nonprofit and free. In fact, if you ever have questions about anything debt related, you should call one of theses agencies and fire away: They’re typically both friendly and knowledgeable.
While the advice is typically free, DMPs aren’t. You’ll normally pay a monthly fee of $25 to $50, although that can be waived if you can prove hardship.