Credit Card Debt

What are Credit Card Debt Relief Programs?

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If you find yourself in a bind with your credit card debt, you may consider enrolling in a credit card relief program. Through these programs, a company negotiates with your credit card providers and other financial institutions to reduce the debt you owe. If the company you hire is successful in their negotiations, you could pay less on your debt, reduce the total amount you owe, and get out of debt in about 48 months or less.

Credit card debt relief programs might sound too good to be true—and yes, it’s not the right choice for everyone. There are pros and cons to these programs, just like any other debt solution. So before you decide if this option is right for you, make sure you understand how these programs work and whether they might be right for you.

How do credit card debt relief programs work?

These types of programs help you get out of debt for less than you owe through a method called debt settlement. Here’s how it works:

  1. Sign up for a credit card relief program through a company that specializes in debt settlement.
  2. Stop paying your creditors and instead deposit money into an account that the company sets up for you (this will be used later to settle your debts).
  3. The company negotiates with your creditors one by one in an effort to get them to accept less than you owe on your debt.
  4. Once your credit card relief company reaches an agreement with your creditor, they ask you to sign off on the deal.
  5. After signing off, the debt relief company uses money you’ve been saving in your account to pay your creditor and collect their fee.
  6. Once all your creditors are paid, you will no longer owe any money on that debt.

Most credit card debt relief (or simply “debt settlement”) programs take about 24 to 48 months to complete, depending on how much you owe and how much you can pay into your program account each month. And since many of these programs can be customized to fit your budget, you could get out of debt for a price you can afford.

Do other kinds of debt qualify for credit card relief?

Yes. Credit card debt relief programs could also help you get out of other kinds of unsecured debt (that which isn’t tied to an asset, such as a home or a car). Debts that usually qualify for credit card debt relief include:

  • Credit card debt
  • Department store card debt
  • Personal loan debt
  • Medical debt
  • Some private student loan debt
  • Some business debt

Other debts that are tied to collateral or otherwise do not qualify for debt settlement, include:

  • Mortgages
  • Car loans
  • Other vehicle loans
  • Federal student loan debt
  • Tax debt

The easiest way to see if your debt qualifies is by requesting a free debt evaluation from a credit card relief company.

What are the pros and cons of credit card debt relief programs?

Just like any other debt solution, a debt relief program isn’t right for everyone. It all depends on your particular situation and goals.

Pros Cons
Can reduce your total debt Negatively impacts your credit at first
Debt can be resolved in 24-48 months Debt collectors may contact you
Affordable monthly payments Possible legal action
Professional negotiators on your side Results vary

Credit card relief programs could save you money on your debt and help you become debt-free faster than making minimum payments. Plus, when you choose a professional credit card relief company, you have expert negotiators on your side working to get you the best settlement they can.

Is a credit card relief program legal?

Yes—credit card debt relief programs are a legal way to settle your debt. In fact, many creditors work with credit card relief companies on a regular basis to recoup some of the money they’re owed from people who due to a financial hardship can’t pay back what they owe in full.

But you should know that if you sign up for a credit card relief program, your creditors have the right to call you or take legal action in an attempt to collect the total amount you owe them. That’s why it’s important to work with a reputable credit card relief company that may help with creditor calls or who may offer a legal service that could help if you find yourself facing legal action.

How does a credit card relief program affect your credit?

After signing up, you stop paying your creditors. Doing this gives the credit card relief company the leverage they need to start negotiating your debt and reduce what you owe. Additionally, stopping payments allows you to start putting money into an account so you can settle the debt when your debt settlement company reaches an agreement with your creditors.

But when a creditor sees that you aren’t paying them, they may report your missing payments to the credit bureaus, which negatively affects your credit score. Taking a negative hit to your credit might make you feel a little uneasy. After all, you worked hard for your credit score. But for many clients of credit card debt relief programs, the benefit of getting out of debt outweighs the initial risk of a lower credit score.

Choose the right debt relief option for you

If you are struggling with credit card debt or worried about falling behind on payments, you may want to start comparing credit card debt relief programs. Freedom Debt Relief is here to help you understand your options, including our own debt relief program. Our Certified Debt Consultants can work with you to find a solution that fits your needs and steers you toward a brighter financial future. Find out if you qualify right now.

John Russo is a Creative Manager at Freedom Financial Network. His goal is to make the world of personal finance more accessible so that everyday people can find the right financial solutions for themselves. In his free time, he enjoys hiking, reading pretty much anything, and spending time with his fiancée and two cats.