Are Credit Card Debt Solutions Services A Scam?

All the turmoil in the American economy over the last year has left untold numbers of American families in very bad financial shape. One of the worst problems that have been plaguing families and individuals alike all across the country is credit card debt. We have reached an all time high as a nation with the amount of unsecured credit card debt we are stuck in; thus opening a huge market for companies looking to help people get out of debt. There are a few credit card debt solutions that most people will try when they realize they are stuck in debt; one is consumer credit counseling and two debt settlement. Both of these industries have their fair share of both good companies and scammer companies.

First off I would like to bring up one debt solution that in actuality is no solution at all but nevertheless is exactly what most people end up doing; this is called the “credit treadmill”, the biggest scam of them all. The credit treadmill is the vicious monthly minimum payment cycle the creditors want all consumers to become addicted too. Their ultimate plan is for consumers to get comfortable paying monthly minimums and rack up a high balance. The next step in their devious plan is to utilize the “universal default” clause and get the interest bumped up very high. Once the interest is high on already high debt balances it becomes almost impossible for people to ever get out of debt on their own, especially when only making monthly minimum payments. At this point people will be stuck making payments for at least three decades, and lose over ten times the original balance in interest alone. This is the worst possible case scenario, but unfortunately tens of millions of Americans are stuck in this position with no way out.

Once people finally get out of denial and realize they have a problem and need help to get it sorted out they begin researching what debt solutions methods can work best for them. Many think at first getting some kind of a debt consolidation loan might work only to find out they will get denied for being in too much debt. For many the next path they look down is that of consumer credit counseling.

The credit counseling industry used to be the best path for people to take when getting out of debt, however over the years the banks have gotten greedy and reduced the benefits and many for lack of a better word “scammers” got into the industry.

The benefits of credit counseling are getting interest lowered and being put on a fixed monthly payment, usually resulting in the debtor becoming debt free within 5-7 years, depending on his/her creditors. The problem with these programs is that many people simply cannot afford them, which leads to a very high failure rate of people completing the program. In many cases the cost of the program will end up being equal to or greater than what people were already paying for monthly minimums. If as much as one payment is missed on this program then the client can be kicked off, thus placing them back in the hands of the creditors and their high interest.

A lot of people eventually realize that their only way to really get out of debt is through debt settlement otherwise known as debt negotiation. The problem is that just like the credit counseling industry there are also a number of unscrupulous scam companies. So the question is how do you tell the difference between the good and the bad?

For starters if it sounds too good to be true then it just might be. Many counselors at these debt settlement companies will make outrageous claims just to get people signed up. For example many will say they will save the client over 80% of what is owed; now sometimes this may be true but what they are failing to tell you is the overall cost of the program including their fee as well. If you can save between 40-50% of your debt including the cost of the service fee from the company than that is pretty good and very realistic. So if you find a company that makes outrageous claims run for the hills.

One of the downfalls to doing debt settlement is having to fall behind in order for the creditors to be willing to settle an account. So naturally you must understand your credit score will suffer from the beginning of this process. However towards the end once settlements start getting made your credit score will rebound. And naturally once you fall behind the creditors will be calling you to collect the debt. Some companies do have the ability to somewhat slow the calls down, but no company can promise that all calling activity will be stopped. So if you hear a company claiming this to be the case it may be wise to make sure they are legit.

Perhaps the worst thing a debt settlement company can do is sign anyone up who wants to be signed up without making sure they qualify for the program. By qualify I mean, having the proper types of debt that can be settled, having the right amount of income to get the program done in the correct time frame, and last but not least having the correct mindset to go through with the program.

What some companies will do is put people into programs for way longer than they should be, just so the monthly payment will be low enough to entice the debtor into signing up so they can earn fees. Knowing full well the client will not get many if any benefits from the program for pushing it out so far. Debt settlement should really take at longest around three and a half years, preferably under two if possible. So if you find a company trying to extend you onto a program for four or more years, be weary!

What I mean by the proper mindset is the client must understand that their credit rating will be temporarily affected negatively, and they must accept the fact of collections calls. Too many debt settlement companies simply do not inform people of any negative aspects to this process and only give them the benefits of saving money and time. So once these debtors get rolling with the program and were not aware of falling behind and collections calls they get cold feet and back out. Everything should be discussed up front with the client before they enroll into a program, so the proper expectations are met and everyone is on the same page. This will make for the client to end up becoming successful in getting out of debt

Then there is always the Better Business Bureau (BBB). Always make sure the company is in good graces with the BBB, and ensure they have a low complaint volume. Always ensure the complaints have been answered to the clients liking, this is a sign the company cares about its clients.

I hope after reading this article you feel more enlightened into the credit card debt solutions industry and will aide you in your process of making a decision to get out of debt. If you would like to see if I can help you out then simply click the link below and fill out an application requesting more information. Either I or one of my associates will contact you shortly to discuss whether there is something we can do to help. The company I work for has an amazing track record with the BBB and has helped thousands of people achieve debt freedom since 2005. We can give you an honest evaluation of your situation to point you in the right direction.

Credit Card Debt Solutions