Do Credit Card Debt Relief Plans Work?

Chances are, if you turn on your radio, television, or open your mailbox, you will hear or read a claim from a company offering you debt relief solutions. Though there are many reputable companies on the market offering real solutions, according to the Consumer Federation of America, it is "buyer beware" when entering into an agreement to solve your credit card debt problems.

Debt Settlement Services

Debt settlement services should be used with caution. While they claim they can eliminate between 50 percent and 70 percent of your credit card debt, those claims can are often unfounded or misleading. The Consumer Federation of America says most debt settlement customers drop out of their programs within the first six months, paying large fees to debt settlement companies without settling any debt. In some instances, dealing with a debt settlement company can worsen your debt situation. Typically, debt settlement companies charge a fee to manage your debt, often as high as 15 percent. If you had used the money spent on fees, you could have paid down debt on your own, without the help of an outside agency.

Self-Help

The best method for solving credit card debt, according to the Consumer Federation of America, is to solve the problem with your creditors on your own. If your credit card bills have grown too large to manage, contact the credit card companies yourself. You'll get the best results with creditors if you have an excellent credit history with that company, meaning a history of no late payments and a solid credit-to-debt ratio on your balance. Your credit card company might, as a solution, offer to lower your monthly minimum payment, or lower your interest rate. If you are at risk of defaulting, you stand a chance that card companies will work with you.

Debt Consolidation

Another option that avoids debt settlement or relief programs is debt consolidation. When consolidating debt, you have several options. You can transfer balances from high-interest credit cards to those cards offering lower rates or cards that offer promotional rates. If you are sign-up under a promotional rate, make sure you can pay-off your transferred debt in the time frame that has been fixed or you could wind-up with the same problem, or worse. You can also look at taking out a personal loan or line of credit, but if you are saddled with a lot of credit card debt, you might have difficulty obtaining terms and loans that will work for you.

Non-Profit Credit Counseling

If you can't settle your debt on your own, a good alternative is working with a non-profit credit counseling agency. Non-profit credit counselors will work with you for free or a small fee to not only advise you on money matters but also develop a personalized financial plan to get your bills paid. Even if you can't afford to pay for services, many non-profit agencies can help you with free financial planning. In fact, after undergoing counseling, many customers will be told to manage their debt on their own. There is no quick and easy fix to eliminate credit card debt. The average time for repayment, according to MSNBC, is about three to five years, which is a realistic time frame if you stay determined and dedicated to paying down your debt regularly.