Programs to Manage Credit-card Balances

You may not have to cut up your credit card to make your balance manageable.

You may not have to cut up your credit card to make your balance manageable.

When you make purchases with a credit card, you anticipate being able to pay off the balance. Unfortunately, sometimes life throws you curve balls that make paying that balance difficult or you get credit fever and charge a little too much. Thankfully, programs exist to help make those undesirable credit-card balances more manageable.

Debt Consolidation

If you have more than one credit-card balance, debt consolidation may be your answer. Debt consolidation involves combining all of your credit-card balances, and any other debt you may have, into one debt. Instead of having multiple payments at multiple interest rates, you have one payment with a single interest rate. You may take out a debt-consolidation loan from a company that specializes in debt consolidation or create your own plan by taking out a personal loan through your local credit union or bank or combining your card balances onto a single card.

Debt Management

When you enroll in a debt-management plan, you trust someone else to pay off your debt. You pay one monthly payment to the debt-management company, which then makes monthly payments on your behalf. The credit counselor assigned to your account may work with your creditors to reduce fees or forgive a portion of your debt and help you devise a plan for paying off your debt in a certain period of time. While one monthly payment and a plan for paying off debt may sound appealing, the fees charged for these services may cause your monthly payments to increase.

Debt Settlement

Through a debt-settlement program, a company negotiates with your creditors for less than you owe. While some companies will guarantee that you will end up paying pennies on the dollar, you can realistically expect to pay 20 to 25 percent less. The company will also charge a fee for its services. Debt settlement requires having funds available to make lump-sum payments to your creditors. While some debt-settlement companies are really good at negotiating, in most cases, if you have the time, you can skip hiring someone and work out a settlement on your own.

Credit Counseling

A credit counselor will help you design a plan for managing your credit-card balances and paying off debt. This plan may include creating a budget and cutting expenses to make more money available for paying off debt. You may also design a plan to pay more on your credit cards each month in order to pay them off sooner. Often a credit counselor works in conjunction with a debt-settlement or debt-management company and may suggest those programs to help meet your needs.

Credit Hardship Plan

Most credit-card companies offer a hardship plan to help you manage your balance after an unexpected life change, such as losing your job or developing a serious illness. If you qualify for the lender's hardship program, you may receive a lower interest rate, lower monthly payments for a period of time or a reduction in fees. While enrolled in the program, most lenders will suspend your account, which means that you can no longer use your credit card. Not all companies will reinstate your account when you complete the hardship program.


About the Author

Stacy Zeiger began writing in 2000 for "Suburban News Publication" in Ohio and has expanded to teaching writing as an eighth grade English teacher. Zeiger completed creative writing course work at Miami University and holds a B.A. in English and a M.Ed. in secondary education from Ohio State.

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