People, what do you know about credit card debt consolidation companies? Are they legit or are they a scam? If a person has significant credit card debt on several different credit cards, does it make sense to use such a service?
Has anyone here used such a service? Or know anybody else who has?
Basics: There are credit counseling services, most of which are legit and quite helpful. They can help with debt consolidation, and lenders tend to look favorably on consumer who work with them. However, debt consolidation companies are scams, as are credit repair firms. You can do your own consolidation simply by getting a card with a larger line and transferring balances, or by taking a equity credit line and using that to pay off cards. You have to be careful to take advantage of special offers for free transfers and zero interest. Else, the fees can be horrific.
However, consolidation is a slippery slope. If you consolidate and then run up balances on cards again, you’ve taken a huge step toward bankruptcy. That’s especially true when we expect interest rates to increase in the near future.
Ideally, you park the credit cards in a drawer, pay the balances down, and then limit your use to a single card. Your budget and your credit score will both thank you.
If you have a good record of payments and your interest rate on a card is not zero, then you should call the card company to have the rate reduced. They will do that for good customers.
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Thank you, very helpful. So if it’s a for – profit debt consolidation company, it’s better to avoid it?
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I have never used debt consolidation so I don’t know. But if you have a TIAA-CREF account, you can borrow against it. It’s what I did to pay off my credit cards. It’s a low APR, doesn’t affect your retirement savings at all, and is invisible to credit card companies so it look like you are borrowing more money. My credit shot up once I did that. So that’s something to look into also.
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This is not for me. I don’t have any credit card debt since my husband explained to me that I was enriching Goldman Sachs with my interest payments. 🙂
It’s for somebody else but I can’t offer them advice because I paid off my debt the way Vic suggests, cutting up the cards and paying off the balances.
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ETA it “DOESN’T look like you are borrowing more money.”
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I’m using a non-profit credit card counselor system right now. Our credit card debt will be paid off in three more years. It’s been very hard going from dependence on credit cards to not using them at all. But we’ve been on the program for two years now, and it’s definitely helped us be more responsible and not spend money we don’t have. We had around 55,000 in credit card debt, mostly due to the fact that as an adjunct I couldn’t find summer teaching and we needed money to survive.
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It’s great that this is working for you and you’ll be free in just 3 years! I will now recommend this kind of service in good conscience.
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