Can You Use Your Credit Card Before Consumer Credit Counseling?

If you are considering consumer credit counseling, you need to understand how the process works and the rules involved about credit card use before, during and after your counseling.

Can I use my credit card before getting credit counseling?

You can use your credit card(s) before you seek credit counseling. But if you find yourself in need of credit counseling, should you be incurring additional debt? If you're in this predicament, you've already got debt problems and are behind on payments and accruing fees and interest. Unpaid debt balances can skyrocket quickly.

How does credit counseling work?

Credit counseling starts by contacting a credit counseling agency. Reputable, nonprofit organizations can be found on the Web or in the phone book. Many offer counseling via phone, in person and online, so choose the method you prefer. The credit counselor will evaluate your situation and determine the best course of action for you. One option may be a debt management program.

What is a debt management program?

A debt management program is a structured debt repayment program tailored to your financial situation. After reviewing your entire financial picture, including income, budget, and debt, the credit counseling agency negotiates with your creditors on your behalf, letting them know you want to participate in the program. If possible, the agency works with your creditors to negotiate lower interest rates and to waive fees, which lowers your balances. You are given a payment plan outline that shows how long it will take to repay all your debt. Each month you make one payment to the credit counseling agency, which disperses it to your creditors until your debt is paid in full.

Can I use my credit card(s) during my debt management program?

Generally, you can't. In exchange for lowering your interest rates and waiving fees, creditors require that you stop using your cards during your debt management program, so your accounts are essentially frozen. Some credit counseling agencies offer debt management programs that allow you to keep one card active for emergencies, but policies vary. Be sure to ask about this option.

Can I use my credit cards after my debt management program?

Once you have successfully completed your debt management program and your credit card debt is fully repaid, you can resume using your existing credit cards if your creditor agrees. You may also be eligible for new credit. But be careful not to overuse or abuse your credit or you may find yourself right back where you started.