Are Credit Card Debt Elimination Programs Legit?

If you are overwhelmed by debt, educate yourself about legitimate options.

If you are overwhelmed by debt, educate yourself about legitimate options.

It doesn't take much effort to damage your credit and rack up thousands of dollars in debt. It does take considerable time and effort, though, to restore your credit and pay down that debt. If a company tries to sell you its services by claiming to make your credit card debt go away almost like magic, be cautious. The Federal Trade Commission notes that nearly all so-called debt elimination programs are scams.

Spotting a Scam

The number-one sign that a debt elimination company is up to no good is that they expect you to pay before they do any work for you. Upfront fees are actually prohibited under the Credit Repair Organizations Act, according to the FTC. You shouldn't pay for something unless you have seen that it has worked. Other signs of a scam include promises to remove any negative information from your credit history and claims that you can construct a new identity for yourself, wiping out your old credit history. Usually, a scam company will tell you to stop paying your credit-card bills altogether.

Getting Counseling

One legitimate way to get your credit-card debt under control is to seek out the services of a credit counselor. Keep in mind that there are honest counselors and not-so-honest counselors. You want to find a not-for-profit counseling service, so that you know the counselors are there to help you, not make a buck off your problems. An ideal counseling service will provide free information on their services, according to the FTC, and won't charge exorbitant fees or refuse to help you based on your ability to pay. Look for a counselor who provides budgeting help and debt management assistance. Choose a service that is accredited and licensed in your state.

Debt Management

You can develop a debt management plan by working with a credit counselor and the credit card companies. With a debt management plan, you send the counseling company a lump sum every month to pay down your various debts. The sum is allocated as agreed to each of your debts. Communication between all parties is critical if you decide to sign up for a debt management plan. Before you start sending the counseling company money, check with your creditors to confirm that they've agreed to the terms of the plan. You don't want to funnel money to the counseling company only to find later that it's not being used to pay off your debts or that the creditors haven't accepted the terms. Don't stop paying your debts between the time that you decide to enroll in the plan and the time that the plan actually starts, or you could face high late fees and increased interest charges.

Doing It Yourself

You can attempt to cut down on your debts yourself without the help of an outside company. Lisa Madigan, the Attorney General in Illinois, suggests calling the credit card companies directly to ask if they offer any repayment plans for customers who are struggling with large debt and high interest rates. Also, check your credit report at least once a year to be sure that it's accurate. Write to the reporting agency to correct any errors you spot.


About the Author

Based in Pennsylvania, Emily Weller has been writing professionally since 2007, when she began writing theater reviews Off-Off Broadway productions. Since then, she has written for TheNest, ModernMom and Rhode Island Home and Design magazine, among others. Weller attended CUNY/Brooklyn college and Temple University.

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