Credit Card Debt Options

Millions of Americans worry about debt in the middle of struggling with their financial situation. Worrying about debt can be stressful and overwhelming. But it does not have to be. Debt relief can be achieved through various pathways. Your credit card debt options include continuing to pay minimum payments, credit counseling, debt settlement and bankruptcy. Each case is different, but being educated about the options available is the best way to choose the right way to manage debt.

Borrowers can always choose to continue paying their minimum payments, if they can afford this amount. This can be a hardship on many borrowers, since the minimum payment amount can be high and most of that payment is applied to interests and fees. Over time, borrowers can spend up to twenty years trying to pay off credit card debt if they only make the minimum payment. Additionally, they end up paying up to twice as much as the original balance. Another disadvantage to this credit card debt option is that trying to meet minimum payment requirements sometimes makes it hard for the borrower to pay his other bills. If this is the case, this is not a good option for the borrower, and he should look for other ways to manage his debt.

Credit counseling is done through consumer credit counseling organizations. These organizations act as a liaison between the borrower and the creditor by negotiating lower interest rates and fees on the balance of the debt. However, they do not attempt to lower the actual balance of the money owed, so the monthly payments are higher than with some other debt relief options and borrowers pay back 100 percent of the balance plus interest. Through credit counseling programs, borrowers usually last about five years to pay off the debt. Credit counseling organizations can be non-profit or for profit. However, the non-profit organizations are usually funded by the credit card companies, and that is something the borrower should investigate ahead of time.

Debt settlement is an alternative for borrowers in serious financial trouble who are looking at credit counseling or even bankruptcy. Debt settlement companies assist borrowers in reaching an agreement with the creditor to pay a reduced amount of the total debt that will be considered as full payment. Borrowers should be careful in choosing a debt settlement company and should look for established companies with good track records who advise them on both the benefits and disadvantages of this option. Debt settlement does not mean that creditors will accept a small amount for the total debt. It also does not mean that creditors cannot sue the borrower for the money owed if an agreement is not reached or that the correct, but negative, information in the borrower's credit report will be removed. Debt settlement companies charge large fees upfront to set up the account, monthly service fees and a final fee that is a percentage of the money saved. During the process of setting up a debt settlement program, borrowers should continue to communicate with the creditors to inform them of the financial hardship and if possible, should continue making minimum payments.

Bankruptcy is another credit card debt option. Depending on what type of bankruptcy a borrower files, he can discharge all of his debt or he can discharge part of it, in a process closer to credit counseling. There are strict laws regarding bankruptcy, and it is not available to all borrowers. The terms governing bankruptcy filing vary from state to state. Additionally, a bankruptcy stays on the borrower's credit report for at least seven years and can affect the borrower's credit for up to 20 years.