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Credit card debt

...and your options

February 7, 2011
By JOHN PEPIN Journal Staff Writer

MARQUETTE -Credit counseling experts say there are many options to consider when you are struggling with high credit card debt.

There are times when credit card debt becomes overwhelming, making it necessary to take some action to get your finances back in order. Some of the options designed to help consumers battle their credit card debt problems include a range of available programs.

A Debt Management Program is a formal arrangement between you, the creditors, and a counseling agency. These programs involve setting up a payment plan to repay your debts. You deposit funds with your credit counseling agency each month. They send those funds directly to your creditors. The agencies are usually able to get you lower interest rates, waived fees, and the elimination of collection calls. To find a non-profit credit counseling agencies in our region, visit the National Foundation for Credit Counseling at

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A debt settlement is another assistance option. Under this arrangement, your creditor agrees to accept an amount less than the current balance and then considers the account paid. This option does have some advantages but there are several drawbacks. First, you usually need to pay in a lump sum. While it does show the debt as paid, it is considered negative and would have a negative impact on your credit score. If the creditor forgives more than $600, they are required to report that to the Internal Revenue Service and you may be required to report that amount as income when you file your taxes.

Hardship programs offered by credit card companies themselves may offer reduced rates, reduced or waived fees and/or reduced monthly payments. Typically, these programs are offered for a very limited period, and are intended for short-term, financial difficulties.

Doing a balance transfer from a higher interest credit card to a new card with a lower rate is also an option. The new card may have better terms. However, you generally must have good credit to qualify. Experts say to be aware, you are simply shifting the debt, not reducing it.

Getting a consolidation loan from a bank or credit union that would be used to pay off your credit cards is another possibility. Usually, these loans would pay off high interest credit cards with one loan, at a lower rate and payments. However, these loans are not easy to get as some type of collateral or a co-signor may be required.

Using home equity or other assets, you could get a loan to pay off high interest credit cards at a lower rate. However, you are essentially moving unsecured debt to secured debt, meaning that in case of default, you could be putting your collateral at risk, experts say. Much like balance transfer, this option is essentially shifting debt, not paying it down.

John Pepin can be reached at 906-228-2500, ext. 206. His e-mail address is



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