On the heels of increases in interest rates and cuts in credit limits come the credit card issuers who, at the behest of the National Foundation for Credit Counseling, are now making changes in policy for those who are unable to repay their credit card balances.
Two issues are driving their actions. First the legislation that is moving through Congress will limit what they can do in the future, and they want to put up a good front before it finally passes in order to gain favor with lawmakers in Washington.
The second is that they are beginning to understand that if they refuse to help their own customers, their profitability will take a serious plunge from which they may never fully recover.
The NFCC approached the credit card issuers and have worked out even more concessions for consumers who are already strapped and cannot repay their balances.
These concessions include having some fees waived after you enroll in a program with a debt management service. You will still pay some interest according to who your credit card account is with.
In return, you agree not to add to your already large amount of credit card debt. Then, you agree to pay specific amounts towards you debt each month with the goal being to have it paid off in five years.
If you have $24,000 of credit card and other unsecured debt, with a household income of $39,000 then you would probably be on a plan to pay $540 per month for five years.
These are the kind of plans that are being presented right now at debt management companies right now. But there are a couple of other items that you need to pay attention to should you sign up for one of these programs.
Monitor and make sure. How do you know that the debt management company is making the payments that they need to every month on your behalf? You need to ask this question so that you can monitor and make sure that the money is going where it is supposed to be going. After all, it is your financial future on the line, not the debt management company.
What happens after smaller debts are paid off? Debt management companies have a standard answer to this and that is that they are paying the bills each month and the re-payment plan is spread out over five years to help you. But, also behind this is that once the debts are gone, the make their money on the rest of the payments that you are making. Only they do not have to pay the creditors once the debt has been paid for.
Small incremental changes are beginning to take effect and move the pendulum more towards the consumer. Things will get better. Make a plan and then stick to it in order to work your way through your debt issues.
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