A Guide to Credit Card Counseling

A Guide to Credit Card Counseling
by: Justin Narin



Credit cards are one of the leading causes of consumer debt.
Unfortunately, 2005 bankruptcy reform laws made it harder than ever to
reduce credit card debt through bankruptcy. Fortunately, you can still
find a way out of debt if you’re committed. Credit counseling can help.

If you’re drowning in debt, you have to stop using your cards. Paying
cash is the only way to get a true picture of how and where you spend
money. Paying cash also curbs your spending because it feels like “real
money.” Once you’ve reduced your spending, you’ll have more money to pay
off the debts.

Start by cutting up your credit cards. Then contact your creditors and
ask them to reduce your interest rates. You should also consider debt
consolidation to further lower your interest rates and streamline your
payments.

If that doesn’t help you begin to pay down your debt, then it’s time to
get professional help from a credit counseling service.

Professional Credit Card Counseling

When you visit a credit counseling service, don’t expect a magic bullet
that will eliminate your debts and allow you to keep spending the way you
always have. Instead, you’ll be expected to change your spending habits
and work had to pay off your debt. Most counselors will walk you through
the following steps:

* Stop using credit cards. You can’t get out of debt while you continue
to create new debt.

* Analyze your income and expenses. As the counselor goes over your
budget with you, she’ll recommend places you can cut your spending to
free up more money for debt payments. For example, she may suggest
cancelling cable, eating out less, driving less, or not buying clothes,
accessories, and entertainment products while you work on your debt.

* Create a debt solution. Most counselors will recommend one of three
debt solutions: credit card consolidation, debt management, and debt
settlement.

* With debt consolidation, the counselor will arrange for a personal or
home equity loan that will be used to pay off your other debts. You’ll
then have the responsibility of paying off the consolidation loan.

* With a debt management plan, all of your debts will be enrolled in a
2-4 year program. The counselor negotiates with your creditors to lower
your interest rates. You then pay the service every month, which
distributes the funds appropriately. You’re barred from using the cards
or acquiring new debt while in the program.

* With debt settlement, your counselor will negotiate with your creditors
to reduce the total balance due. This option is reserved for very serious
situations because it will damage your credit history and credit score
significantly. There may also be tax implications.

The solution recommended by the debt counselor depends largely on your
current income, necessary expenses, and the size of your debt. Try to
find the solution with the lowest fees and fastest resolution so that you
can get out of debt and move forward with your new-debt free life.

You should also work hard to change your spending habits so that you
don’t find yourself in debt again. Ask your counselor for educational
materials about budgeting, money management, and financial planning. The
credit counseling service may also offer free or low-cost classes on
controlling even your required expenses, like groceries. The more you
save on your expenses, the more you have to pay off those credit cards.

If you need to get your debt under control, and the DIY options aren’t
right for you, contact a credit counseling service for help finding the
best solution for you. You can get out of debt.

For more articles on credit card counseling, please visit:
http://www.bills.com/credit-card-counseling/

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About The Author
Justin Narin has 5 years of experience as a financial adviser; his key
areas are loan consolidation, debt relief, mortgages etc. For more free
articles and advice visit http://www.Bills.com.