Tipping The Scale with Credit Card Debt? How Credit Card Counseling Could Help You

In this this day and age, it’s no secret that millions of Americans suffer from credit card debt. Although this can be an extremely stressful financial burden, credit card counseling can help you make a plan to pay off your cards and live debt-free in the future. When seeking credit counseling, it’s important to know which credit counseling agencies are most reputable, such as non-profit organizations. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs. To learn more about when and how credit counseling can benefit you, continue reading on.

What exactly is credit counseling?

Simply put, credit counseling can help you lift the burden of credit card debt.

Through a nonprofit credit-counseling agency, you can work with a counselor to resolve your financial problems on your own. You can also enter into what’s called a debt management plan. Through that plan, you can consolidate your credit card payments and get the cards’ interest rates reduced, making your financial obligations easier to tackle.

While you’re in a debt management plan, your credit card issuers won’t report you as being delinquent on your bills as long as all of your payments are made on time. Through a debt management plan, a nonprofit credit-counseling agency will charge fees, but the cost is minimal compared with a hefty debt load.

How do I choose a credit counseling organization?

Before choosing a credit counseling agency to help with debt, it’s important to do your homework. Check out the Better Business Bureau ratings of credit counseling agencies you’re considering. In addition, find out whether those agencies carry industry accreditation and whether complaints have been filed against them with your state attorney general’s office.

A reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If a firm doesn’t do that, consider it a red flag and go elsewhere for help.

Visit the website of the National Foundation for Credit Counseling to find a nonprofit credit-counseling agency near you. All agencies affiliated with the foundation provide their services at no cost, except for those debt management fees. But be aware that “non-profit” status doesn’t guarantee that services are free, affordable, or even legitimate. The Federal Trade Commission warns “In fact, some credit counseling organizations charge high fees, which they made hide; others might urge their clients to make “voluntary” contributions that can cause more debt”. By large, however, nonprofit credit-counseling agencies are trustworthy.

What questions should I be asking?

Picking the right credit counselor is a vital component in effectively becoming debt-free. Here are some questions to ask to help you find the best counselor for you:

  1. What services do you offer?Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan (DMP) as your only option before they spend a significant amount of time analyzing your financial situation.
  1. Do you offer information? Are educational materials available for free? Avoid organizations that charge for information.
  2. In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
  3. What are your fees? Are there set-up and/or monthly fees? Get a specific price quote in writing.
  4. What if I can’t afford to pay your fees or make contributions? If an organization won’t help you because you can’t afford to pay, look elsewhere for help.
  5. Will I have a formal written agreement or contract with you? Don’t sign anything without reading it first. Make sure all verbal promises are in writing.
  6. Are you licensed to offer your services in my state?
  7. What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, by whom? If not, how are they trained? Try to use an organization whose counselors are trained by a non-affiliated party.

Is a DMP right for you?

A DMP alone is not credit counseling, and DMPs are not for everyone. Don’t sign up for one of these plans unless and until a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money.

Here are some important questions to ask if you’re considering enrolling in a DMP:

  1. How does your DMP work? How will you make sure that all my creditors are paid by the applicable due dates and in the correct billing cycle? If a DMP is appropriate, sign up for one that allows all your creditors to be paid before your payment due dates and within the correct billing cycle.
  2. How is the amount of my payment determined? What if the amount is more than I can afford? Don’t sign up for a DMP if you can’t afford the monthly payment.
  3. How often can I get status reports on my accounts? Can I get access to my accounts online or by phone? Make sure that the organization you sign up with is willing to provide regular, detailed statements about your account.
  4. Can you get my creditors to lower or eliminate interest and finance charges, or waive late fees? If yes, contact your creditors to verify this, and ask them how long you have to be on the plan before the benefits kick in.
  5. What debts aren’t included in the DMP? This is important because you’ll have to pay those bills on your own.

Working with a credit counseling organization is just one option for dealing with your debt. You could also negotiate directly with your credit card company, work with a debt settlement company, or consider bankruptcy. As everyone’s financial situation is different, your action plan to deal with your credit cards will be unique to you and your credit counselor will be with you every step of the way to implement it and provide additional counseling whenever you need it.