If you don’t take steps to deal with it now, credit card debt can haunt you for the rest of your life! Even a small debt can grow out of your control if you aren’t careful. A smart consumer will take steps to avoid credit card debt in the first place, but what can you do if you are already in debt? Here are a few mistakes to be aware of:
- Not Understanding Debt Relief — Debt relief programs exist to help you dig your way free of credit card debt. However, not all programs are the same. Credit counseling, for example, aims to help you get a good credit score, but it won’t deal with problems like big debt. Debt settlement, however, is designed to help you pay off your debts over the long term. Debt consolidation helps you take out a large loan to pay off the many smaller debts. Understanding the difference between these debt relief programs will help you know which one is right for your particular situation.
- Canceling All Your Cards — Why is this a mistake? Well, if your last credit card activity ended up with you owing money, it’s the last thing on your credit history. But, if you keep using a credit card as you are trying to pay off your current debt, you’ll start improving your credit score by showing that you can be smart with your credit. You always want to have available credit when negotiating debt payments. Never cancel ALL your cards–keep one or two with the best rates.
- Signing Up for Automatic Payments — Bill collectors will usually use this strategy to get you to pay off the amount owed. However, when you do this, you’re essentially giving them access to your bank account. There is a risk of overdrawing, which could cause you to owe money to your bank as well as the credit card company. NEVER allow outside access to your account for automatic payments.
- Falling for Bill Collectors’ Harassment Tactics — Some bill collectors will try to stop you from signing up for a debt consolidation or relief plan, or they’ll try to harass you into deviating from your current payment plan. If this happens, just remember that they get paid according to the amount of debt you pay off. They don’t care about your well-being–they’re just in it for the money. Let them bluster or harass; don’t change your plan, but keep on with your debt consolidation or relief efforts!
- Choosing a Company Based on Profit vs. Non-Profit — Some debt relief companies market themselves as “non-profit”, trying to get you to believe that they’re in it to help you without any financial motivation on their part. FALSE! Non-profit debt relief companies’ fees are usually the same as “for profit” companies. In the end, you should choose a debt relief company that offers you the best path to financial freedom, not that uses a gimmicky ploy to sign new customers.