In recent months, many Americans have made a greater effort to seek credit card debt reduction and reduce the balances they owe, but some may not know where to start. Fortunately, there are several options available for consumers thathave a financial goal to achieve credit card debt reduction.
Depending on how quickly consumers want to reduce their balances, they may opt to reduce their credit card spending and increase the amount they pay toward their principal every month. The new financial reform bills mandate that any money paid over the minimum payment listed on a monthly statement be applied to the portion of the balance that carries the largest interest rates.
A similar approach to credit card debt reduction is to identify a credit card with no introductory rate, or at least a low one, on balance transfers. Individuals who qualify for this type of card – which isn’t easy to do – may be able to pay off the card more easily because the account won’t begin compiling interest during the first year.
Consumers whose credit is not good enough to obtain such an unsecured card might find that a debt consolidation loan secured against collateral may help them reduce their debt more quickly. With this method, a lender gives consumers a lump sum large enough to cover all of their credit card debts and, in essence, reduce their numerous debts into one account. The single account generally carries a lower interest rate and requires less money per month in payments.
Debt settlement is another useful tool for obtaining credit card debt reduction. With this process, professional negotiators contact a consumer’s credit card lenders and explain their client’s financial situation. Many credit card companies are willing to negotiate a settlement when they know that the consumer is in a state of financial hardship. Debt settlement programs can help consumers get out of debt fairly quickly and at a lower monthly payment compared to the alternatives.
However, the debt settlement method does have some drawbacks. First, when lenders allow the total debt to be reduced, they do so on the condition that the remaining balance be paid in a lump sum. This requires that the consumer have a large amount of money available to send to their creditor, which may not be possible. Debt settlement also has a serious impact on a consumer’s credit score, which may make it more difficult to secure a loan or another credit card in the future. Typically, clients in settlement programs will experience increased collection calls, and certain lenders can become aggressive with their collection attempts.
Consumers that are seeking credit card debt reduction should do extensive homework on all the options that are available and make sure they are comfortable pursuing the right solution for their particular situation.