Avoiding Unsecured Credit Card Debt

Most people know that the best way to avoid credit card debt is to use…

Most people know that the best way to avoid credit card debt is to use a credit card for purchases only if they know they will be able to pay for them when the statement comes, and pay the balance of the card in full every month.

However, people are human and don’t always do the wise thing when it comes to finances. They may purchase a costly item that they consider to be a bargain or have a reduction in income and cannot pay the credit card balance when it is due.

Whatever the reason is for your debt to get out of hand, there are debt solutions to help you get debt free. When you discover that you will not be able to pay the minimum balance on a credit card, contact the company and explain your situation to them. You may be able to negotiate a plan that will lower the amount you owe, or they may accept lower payments. Do not wait to call them until they start harassing you. If you put it off too long, they may turn your account over to a collection agency that will be harder to deal with.

If you are unable to negotiate with your credit card company, a debt settlement company may be able to clear your debt for you so you can get back on your feet again. If you have more than $10,000 in unsecured debt, the debt settlement company may be able to convince the credit card company to lower your outstanding balance by as much as 60%. Reducing a $10,000 balance to $4,000 would lower your payments to make them manageable again.

If you decide to use the services of a debt management company, be careful to choose a company that is experienced and reliable. Contact the Better Business Bureau, your state Attorney General and your local consumer protection agency for information about the company, and read the contract carefully before signing anything.

There are a few negative aspects of eliminating a large part of your debt. If your credit card company writes off part of your debt, the IRS may consider that amount the same as income and require you to pay taxes on it. Your credit rating will be lower because you were not able to pay your debt in full, so you will have difficulty getting a loan until you can build your rating back up again.

If your debts have become unmanageable, don’t ignore them, because they won’t go away until you take some type of action.