Credit Card Consolidation

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Having a credit card can make life more convenient and in some cases be a real life saver for emergency situations. However, it is all too common to abuse this small piece of plastic. There are millions of people across North America who have credit card debt and are struggling to get out. 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.

Basically what these companies do for you is negotiate repayment terms with the credit card company on your behalf. They are usually able to reduce your monthly payments and prevent you from falling further in debt with that particular company. This can allow you to regain some ground and finally start paying off those bills, rather than paying the interest alone. However, there are other things you need to consider.

A lot of people ask if these companies will damage their credit score. The long term answer is no, not usually, and the short term answer is yes it can leave a dent. There are many factors that determine your credit score so it is hard to say exactly how much something will affect it. However, one thing that we know severely effects your credit score is bankruptcy. That can really put a black mark on your file for a good 7 years at least. Sometimes you are able to actually improve your credit score if the lender agrees not to mark your situation in their books, but that is usually wishful thinking.

Credit card consolidation companies are usually able to get the credit card company to freeze your account, have the monthly interest removed, and allow you to pay principal payments until it is finished. So while you are paying it off you are not allowed to use it. I ran in to that problem in the past. I thought I would be able to continue to use the card and they would just freeze the interest. That was wishful thinking. At the end of all the payments, I thought I would be able to use my card again. Unfortunately I was not. My Visa and MasterCard are now a thing of the past. I tried to reapply for one but was denied several times even though I have a solid job and have not gotten in to any more financial troubles.

There is usually a monthly fee for using a credit card consolidation company. This amount usually depends on how much you owe. I don’t understand why they wouldn’t charge a flat rate for everyone but I guess they want to milk the system like everyone else. Be sure to find out how much they take compared to the amount of interest you would have otherwise paid. Sometimes you’re better off at the mercy of the credit card company.

I definitely would use a credit card consolidation company in the future if I had problems and couldn’t get myself out. Rather than digging a deeper hole in debt, they can offer some relief and help you avoid bankruptcy.

If you decide to use a credit card consolidation company, make sure that you keep the future in mind. Having creditors calling everyday call really make us make bad decisions. Get all of the information you can and make an educational decision. If you are having a hard time, talk to your accountant or lawyer who can help you access your situation. I wish you the best on your goal to get out of debt.