Credit Card Debt Management Programs

Debt management programs can help you deal with large credit card debts. These programs help lower credit card payments, decrease interest rates and reduce or even settle outstanding balances. If circumstances prevent you from making the minimum monthly payment, debt management programs provide a way to consolidate payments into a lower monthly payment.

Basic Debt Management Plans

A Debt Management Plan (DMP) helps consolidate your debt, usually through credit counseling agencies. With a typical DMP, you give monthly deposits to the counseling agency, which uses the money to pay off credit card bills, loans or medical bills. Your counseling agency and credit card companies or creditors work together to establish a payment schedule. Through negotiation, your credit counseling agent may be able to lower interest payments or waive fees. A typical payment plan through an agency takes, on average, 48 months to completely repay your debt. Once paid off, a reputable credit counseling agency will work with you to avoid future debt problems and improve your credit score. The credit counseling agency sometimes charges nominal fees to help cover expenses on behalf of the consumer. The Federal Trade Commission suggests careful research before choosing a credit counseling agency or agreeing to a DMP.

Debt Negotiation Programs

In addition to the basic debt management plan, agencies and debt settlement attorneys sometimes offer debt negotiation or debt settlement programs. These are when credit counseling agents contact creditors with information relating to your current financial situation and negotiate a way to quickly settle the outstanding balance on your credit card. However, the Federal Trade Commission warns that this route "can be very risky and have a long term negative impact on your credit report and, in turn, your ability to get credit." According to the FTC, counseling agencies or firms often charge high fees for debt negotiation, and claim that they can settle debts for less than half of the amount owed. In fact, creditors have no obligation to lower the amount you owe or completely write off your balance. Several states have laws which regulate debt negotiation companies; check with the FTC and your state's Attorney General for additional information.

Debt Management Software

Debt management software uses information about your debts, interest rates, current payments and any outstanding balances on your credit cards to create a detailed debt management plan customized to your needs. ZilchWorks offers a debt reduction planner which allows you to set your own payment plan and terms. You can also set a goal date in which you want to pay off your credit card debt and the software will automatically calculate how much you need to pay off each month in order to reach that goal. Likewise, Mint.com, a free online money management tool from Quicken, consolidates your accounts and analyzes your spending, which helps identify ways to reduce debt. You can use these programs from the privacy of your own home, without involving outside credit counseling agencies.