Managing with Credit Card Bills

With credit card default at near record highs, banks are much more likely to work with you.

With the unemployment rate hovering at 10%, many consumers are worried about being able to pay their credit card bills. The good news is, there are options available to consumers that can help.

This article will discuss several options that can help consumers get over the hump, and avoid having to file a personal bankruptcy.

Economic times are tough for everybody these days. It's not just consumers with credit cards feeling the pinch, it's also the credit card issuers. In fact, the rate of default on payments is almost as high as the unemployment rate. That's nearly 10%! Because of this credit card companies are way more willing to work out a deal with their customers. They would rather recover some of the money than none of the money! If you are one of the many Americans who is having trouble making your payments, the best time to make a deal may be right now.

Here are a few options to consider.....

Work with a Credit Counselor - working with a counselor is one of the better options. First of all these are non-profit agencies and generally train their counselors. Some of these agencies are funded by the creditors themselves. Your counselor will work directly with your credit card company to cut interest rates, eliminate late fees, and work out an affordable monthly payment. Depending on how much debt you are carrying, this can potentially lower your monthly payments and free up some cash.

Debt Management Program- In some cases a credit counselor will recommend entering a debt management program. With this option you will have to close your accounts and give up the cards. Your credit score will not be damaged so long as the monthly payments are made on time. The way this works is the management company works to reduce your overall balance by as much as 40%. You simply make monthly payments to the company and they in turn make your payments for you. If all goes well you end up paying much less than the original balance. You can take up to 5 years to pay off your reduced balance.

Debt Settlement Company- Not the best option, but better than bankruptcy. These companies are in business to make money. They charge you a % of your debt. They will tell you to stop making payments on all your cards right away. In the mean time you will make payments to them on a monthly basis. This money will be placed in an account and as it builds up they will settle your accounts one by one for less than you currently owe. The drawback is once you stop making payments your creditors will start calling up demanding payments. And to make matters worse, your credit score will take a hit within the first month. Then on top of being harassed on the phone and a lower credit score, you may be issued a 1099 for any part of your balance that was forgiven. So you could end up paying taxes on the forgiven debt. Clearly a last resort to filing a personal bankruptcy.

Deal with it on your own- With credit card default at record breaking levels, some credit card companies are more willing to negotiate with you directly. In some cases when you stop paying them they will make you an offer directly. If you do accept an offer from the credit card company, you can expect to be asked to pay that amount off in no more than 3 payments. So if you don't have the funds to pay it quickly this option might not be such a good one. It doesn't hurt to call them directly if you can't make the payments. They are as willing to work with people now as they are ever going to get.

Whatever your situation is, take a deep breath, and take a good hard look at your options. You do have them, especially now. There has probably never been a time when banks were more willing to work with people than right now.

Credit counselor agencies are available in most local areas, check your local phone book. However if you need more info check out the National Foundation for Credit Counseling @ nfcc.org.