Credit card debt is a major concern for many American households. Especially after the holiday season or major unexpected expenses, even the minimum monthly payment due on a credit card balance may strain a household’s budget.
People may see few options for paying down their balances and regaining control over their debt. Unfortunately, there are plenty of businesses that can still extract profits from those struggling financially. They will advertise credit card debt services in the hopes that those already struggling will call them for support.
Frequently, these services often lead to worse financial circumstances and often more debt for the person who just wanted help reducing their total amount of debt.
The problem with debt solutions services
Whether you call a company that offers to settle your credit card balances or consolidate what you owe, the business inevitably expects you to carry a balance with it. The company will offer you financing, often at no better terms than the terms provided by credit card lenders. It will then pay off your cards, often closing them in the process.
If the company settles the balance due, that will almost inevitably lead to the closure of those accounts. The lenders may report that you settled instead of paying in full, and the total debt that you owe may remain relatively high as you have to pay off the loan that you acquired to pay the settlement amounts in full.
Even the solutions offered directly by credit card companies, like balance transfers, often come with fine print that will hit you with large fees or a huge amount of interest all at once if you don’t pay the balance in full by the end of a promotional period.
Bankruptcy is a better solution
Most credit card debt solutions simply involve moving what you owe from one company to another. They may close longstanding accounts or leave blemishes on your credit report while still saddling you with ongoing monthly payments.
Bankruptcy proceedings can lead to the discharge of your unsecured debts. You won’t have any repayment obligations after your discharge. Seeing the limitations of common solutions for credit card debt might help you recognize the benefits of filing for personal bankruptcy.