When your budget becomes strained and you find yourself without the funds to pay your credit card bill, you have options. The options that are available and logical for you to accept depend on the amount of your debt, what your creditor or other debt management solution offers and the future of your finances.
Creditor's Debt Plans
When you find that you can't make the payment on your credit card, you should contact your creditor and inform a customer service representative of your plight. Ask the representative if the creditor can defer or lower your payments for a certain period while you regain control of your financial situation. Creditors want their money and are often willing to give consumers a break. Sometimes, a creditor may offer you a debt settlement. This is an option if you are far behind on your payments and you cannot afford to make the payments the creditor is requesting to bring the account current. A debt settlement requires you to pay a amount agreed upon by you and the creditor that is less than you currently owe on the account. For example, the creditor may agree to waive late fees and over-limit fees, saving you hundreds of dollars.
Consumer Credit Counseling Services
If you have several credit cards and you can't make payments on any of them, a credit counseling service may be the right choice for you. Choose a reputable organization that has an absence of negative information from the Better Business Bureau. Credit counselors help you develop a workable budget based on your finances. Credit counseling services can also set up a debt management program for you if you have a considerable amount of debt and no means to pay it. A credit counselor gathers your credit card information such as creditor names, card numbers and balances and attempts to negotiate a lower payment and interest rate with each of your creditors on your behalf. This can save you thousands of dollars in interest charges and consolidate your debt into one convenient monthly payment. You send the credit counseling service a lump sum plus a nominal fee to handle the credit card payments for you each month.
Debt Settlement Companies
Debt settlement companies exist but can be risky, according to the Federal Trade Commission. These type of companies offer to negotiate with your creditors to settle the debts that you owe, often at a settlement rate of 30 to 70 percent of the total balance. This can be a viable option for people who have a large amount of debt or a high balance on one credit card that they can't pay. You may be advised by the debt settlement company to stop paying your creditors, but be aware that late fees and over-limit fees could accrue if you stop paying. Debt settlement companies often have you send payments to them, and they hold your funds in a special account until the amount reaches the amount that they can negotiate as a debt settlement with your creditors. Then, they pay the creditors the settlement amount on your behalf. Investigate any debt settlement company before you agree to work with them. Check with the Better Business Bureau for any negative information that may have been reported about the company. Be aware that the fees this type of company charges for its services may be considerable.
Personal Budgeting
If you have enough income to pay your debts, but you don't keep track of your spending, you can develop a budget that can help you manage your income more efficiently. The first thing to do is add up all of your necessary monthly expenses. Don't include categories for entertainment, dining out and other unnecessary expenditures. Then, subtract the expenses from the net income you receive each month. Once you see how much income you have left over after paying all of your necessary monthly expenses, you can budget a set amount for dining out, entertainment and other items.
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