Credit Card Consolidation

Having a credit card can make life more convenient, and in some cases, a real life saver for emergency situations. However, it is very easy to abuse the power of this small piece of plastic. There are millions of people across North America who have a large amount of credit card debt and are struggling to make minimum payments. For those who are, there may be an option to ease the pain. That option is to seek out a reputable credit card consolidation company.

What Does A Credit Card Debt Consolidation Company Do?

These companies negotiate repayment terms with your credit card companies on your behalf. Usually they are able to reduce your monthly payments and remove the interest from the principal debt owing. This prevents you from falling further in debt with each particular company. It allows you to regain some ground and finally start paying off those bills, rather than paying the interest alone. However, there are consequences and other things to consider before calling the first credit card consolidation company that you find.

Once they negotiate the repayment terms for you, the consolidation company will tell you what they were able to do and how much your new monthly payment will be. The payment that you make does not go directly to the credit card company. Instead, you will pay the consolidation company, they will take their share, and the remainder will go to the credit card company. The amount that the credit card consolidation company takes depends on how much you owe and how much the consolidation company charges for postage for your monthly statement. Be sure to find out how much they take from your payment compared to the amount of interest you would have otherwise paid. Sometimes you’re better off at the mercy of the credit card company.

A lot of people ask if these companies will damage their credit score. The long term answer is no, not usually. The short term answer is yes, it can leave a dent on your credit report. There are many factors that determine your credit score so it is hard to say exactly how much something will affect it. However, sometimes you are able to improve your credit score if the credit card lender agrees not to mark your credit card situation in their books, but that rarely happens. There is one thing that severely affects your credit score, and that is bankruptcy. It can leave a black mark on your credit report for years. So don’t let your credit card situation get so out of hand that you need to file for bankruptcy. If you have to, use a credit card consolidation company.

My Experience with Credit Card Debt Consolidation

I had over $7000 in credit card debt and I couldn’t keep up with minimum payments. So before I got all of the facts, I had a credit card consolidation company freeze my Visa credit card because I was stressing over the phone calls from the debt collectors. I thought I would be able to continue to use the card as long as there was credit remaining on it. I thought they would just freeze the credit card interest to help me get by. That was wishful thinking and pretty naive on my part. And once I had paid off the debt completely, I thought I would be able to use my card again. Unfortunately I was not. My Visa Card was cancelled and is now a thing of the past. I tried to re-apply for a Visa Credit Card a couple years later, but I was denied several times despite having a solid job and no outstanding financial obligations. I may try again later this year.

Credit card consolidation companies can offer some relief and help you avoid bankruptcy. If you decide to use one, make sure that you keep the future in mind. Having creditors and debt collectors calling everyday can cause us to make bad decisions. Get all of the information you can and make an informed decision. If you are having a hard time trying to deal with things on your own, talk to a trusted financial advisor or accountant who may be able to assess your situation provide you with options for debt consolidation. You can get the debt paid off, but it’s going to take patience and some time.