Best Way to Pay Off Credit Card Debt

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What is the Best Choice for Paying Off Your Credit Card Debt?

How to Consolidate Credit Card Debt the Safe and Smart Way

So many American households deal regularly with five-figure credit card debt that we seem to accept it as a fact of life. Baseball, apple pie, and credit card debt! As you already know if you find yourself among this group, credit card debt is nothing to feel nostalgic about. But whom do you turn to for help?

Family and friends are not in a position to pay off your debt, even if you could get over the stigma of asking for help. Churches and community services are often stretched to the limit. And the government (i.e., your fellow taxpayers) has little interest in helping to pay down or pay off your debts.

Where to Get Help with Credit Card Debt

As we take a look at each of these common options to paying off credit card debt, we’ll consider them in light of the criteria noted above. Additionally, we’ll rate each option on a scale of 1 to 5 stars, with 5 being the best.

What's the difference between a legitimate debt consolidation offer and one that will just make things worse?

Legitimate debt consolidation opportunities lead to lower debt balances each month, don’t hurt your credit rating, are available regardless of the amount of debt you have, and have reasonable and regulated fees.

You’ll often find that a legitimate means of consolidating your credit card debt will be either with a nonprofit organization or through a credible banking institution.

Most lists of debt consolidation options include debt consolidation loans, credit counseling services, debt negotiations, and credit card balance transfer offers. But which of these, if any, match the criteria listed above?

It pays to remain vigilant when receiving a consolidation offer that seems too good to be true. More often than not, those offers can lead to numerous problems, many of which we’ll describe below. While it’s true that not all brand-named offers are the best choice, the fact is, if you’ve never heard of the organization and you haven’t solicited their help, be sure to do your homework before contacting them to consolidate your debt.

Credit Card Balance Transfer Offers

Total Score

4/5

They seem to be everywhere, in every mailbox on every mail day. Credit card balance transfer offers. If you have a decent credit rating and carry a balance on one or more credit cards, you will likely receive these offers in your mailbox.

Credit card companies buy mailing lists from the consumer reporting agencies (aka credit bureaus) with very specific demographics: such and such a credit score, so much debt, and this many credit card accounts with balances. With such a specific understanding of their potential client base, the credit card companies know that they’ll get a fairly reasonable return of account applications.

By the way, if you’d like to opt-out of these offers, simply go to OptOutPrescreen.com and fill out the form. It takes just a couple of minutes and lasts for up to five years.

Debt Consolidation Loans

Total Score

3/5

Debt consolidation loans are personal loans that are used to pay off other debts. Debt consolidation loans can be difficult to qualify for since you are essentially asking the new lender to take on all the risk that has been previously spread out among several credit card companies. They look and act a lot like credit card balance transfers except that you typically can’t continue to use the loan to make additional payments in the future.

Nonprofit Credit Counseling Services

Total Score

5/5

Credit counseling agencies have existed almost from the moment the credit card was invented. As long as there have been credit cards, there has been a need for a trusted third party to help people get out of credit card debt.

Debt Settlement

Total Score

2/5

Also known as debt negotiators, this service asks their clients to stop making payments to their creditors and to pay them instead. After a year or two, if the consumer has not been taken to court by the creditors already, the negotiator will then attempt to force the creditor to accept 50% of the balance owed instead of 100%.

Each debt consolidation method has its own advantages and disadvantages. That said, some have disadvantages that far outweigh their advantages. Others are not available to the majority of consumers who would benefit from them. When considering your options, be sure to understand how likely you are to qualify and how each method will affect your debt and your credit.

Rating Scale

1 - 20 percent: One Star

1/5

21 -40 percent: Two Star

2/5

41 - 60 percent: Three Star

3/5

61 - 80 percent: Four Star

4/5

81 - 100 percent: Five Star

5/5
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