The credit card or ‘plastic money’ as it is popularly known has created a revolution in the buying power of people. Today’s consumer has become more bold and takes risks in purchasing goods by swiping his card, more so that the actual payment need only be made to the credit-card company at a later date. The whole process is convenient but problems arise when the card holder faces a credit-card-debt. Such debt occurs when the card holder fails to make the payment on the said date. This debt if not met will only increase leading to huge penalties and interest rates.
Failure to meet credit payments is known as ‘default’ and defaulters are charged a late payment penalty plus a report is sent to credit rating agencies who note it down with a black mark for the concerned person.
Another situation called universal default can also arise for card debt holders. This implies that those creditors to whom the card holder was making accurate payments may in spite of this, increase the interest rates.
You need to look into ways to overcome these debts and one such is a threat to file for bankruptcy in which case the card company would not get a single penny towards the debt since all credit balances will be wiped out. This is not at all appealing to the company therefore they might just respond to your threat and agree to your proposal to pay off some amount (averaging 25% or more) and may also agree to freeze all interest costs and close the account. This may be termed as a credit card debt settlement.
There are of course charges involved in procuring a debt settlement. You need to accumulate funds to pay off the agreed sum and by no means can you find a loan source with low interest rates.
It is best not to go for a Home equity Line Of credit to pay off high interest rates on your card. This is not a good option since credit-card debts are unsecured while home equity credit is secured and there is every danger of losing out on your home in case of default.
Some people resort to selling off their investments to close off card debts which have to be done carefully because of the tax consequences involved.
When you resort to making repayments, it’s advisable to start with your lowest balance credit card account first and later on find the next lowest in line utilizing the money you were paying on the previous lowest balance account. This process goes on until the biggest single debt remains. This method is popularly known as ‘snowballing’.
You can also use the ‘snowflake’ technique of sending a few dollars to your credit card company to reduce the outstanding balance. At first the amount sent might seem meager but over the years it will certainly create a dent in the large amount payable.
The last and final option of course is the ‘nuclear option’ of bankruptcy which will ruin all credit ratings of the concerned person for the next few years but can be opted for in case of no other alternative.
Mike Bordon is a renowned SEO professional and author of many articles and e-books. Presently he is working as the editor of spotwriters. You can contact him to get your articles done.