The way you tackle high interest rates on credit card debt depends on your specific situation. If you have good credit, the first thing you want to consider is a balance transfer. Typically, you need a credit score of 660 or higher in order to be approved for a balance transfer credit card, and a score of 720 or higher to get the best offers. Once you are approved for one of these credit cards, you can transfer your balance from a credit card with a high interest rate to the new credit card with a lower rate. Most balance transfer credit cards offer 0 percent interest on the transferred balance for the first year of the agreement, but generally will charge a fee between 3 and 5 percent of your balance.

While the introductory rate is usually 0 percent, you also need to consider what the regular interest rate is after the introductory period is over. The key to determining how important the regular interest rate is for your situation depends on how long it will take you to pay off your debt. You can determine this by using a credit card payoff calculator. If you are able to pay off your debt before the introductory period is over, the regular interest rate is not of much significance to you. However, if you know it will take you much longer, you should carefully consider how much the regular interest rate will cost you over time.

Unfortunately some unethical companies and agents are taking advantage of the fact that so many consumers are in serious financial trouble.  Because of this, the term credit card debt consolidation is being abused, and is now being used to refer to both debt management and debt settlement.  So, you must be sure of what you are getting into before you sign on the dotted line.

Debt management should be considered if you are barely able to make the minimum payment on your credit card account.  If you opt for debt management, your card issuer will close your account and reduce your fees and/or the APR.  This will have a marginally negative impact on your credit.

There are three options for consumers who are looking for ways to get out of credit card debt.  They are debt management, debt settlement and bankruptcy.  You should explore all three options before you decide which one is the best for you.

Debt management should be considered if you are barely able to make the minimum payment on your credit card account.  If you opt for debt management, your card issuer will close your account and reduce your fees and/or the APR.  Debt management will have a marginally negative impact on your credit.

Once you reach the point where you have been delinquent for 180 days, by law, your credit card issuer will charge off your account, which will ruin your credit score and will remain on your credit report for up to seven years.  After your account has been charged off, your credit card issuer will likely sell the debt associated with the account you had with them to a third party, external collections agency.   Keep in mind that once you are near, or have reached the point where your account is charged off, you may be threatened with a lawsuit or actually sued if there is a reasonable belief that you have the money to pay off a significant portion of your credit card debt.
The bottom line is that not paying your credit card debt will lead to your credit being completely destroyed.  Given the adverse effects, if you have the money to pay your credit card bill you should do so and do so on time.  If you don’t have the money to handle your credit card debt, call your credit card company and try and work out an arrangement that is both affordable for you and reasonable to them.

If you don’t have the money to handle your credit card debt, first call your credit card company and try and work out an arrangement that is both affordable for you and reasonable to them.  If this is impossible you have three options.

The first is debt management and should be considered if you are barely able to make the minimum payment on your credit card account.  If you opt for debt management, your card issuer will close your account and reduce your fees and/or the APR.  Debt management will also have a marginally negative impact on your credit.

If you are less than 180 days delinquent, meaning that your account has not been charged off yet, you can simply call your credit card company (their phone number is on the back of your card) and tell them that you want to make a payment.  Keep in mind that because your account has gone into collections, you have some leverage, and can negotiate with your credit card issuer to get them to waive fees, lower the interest rate on your account, offer an affordable monthly payment plan, oreven settle for an amount less than you owe.

If your account has been charged off (i.e. more than 180 days delinquent), it is likely that your credit card issuer has sold the debt associated with your account to a third party – i.e. a collections agency.  Therefore, you need to call back the collections agency that has been contacting you.  You still have leverage if you want to pay the debt off, and can negotiate with a collections agency the same way you would with your credit card issuer.  A collections agency may also be willing to put you on a monthly payment plan, similar to what you were responsible for prior to your account being charged off.  As you decide how to best handle your credit card debt with any collections agency, remember that they will continue to harass you until you satisfy the debt or make arrangements to do so.

Credit card debt consolidation sounds like it might be a good option for you.  With debt consolidation you can move all of your credit card debt into a loan that carries an interest rate lower than what you are currently being assessed on your credit cards.  When you do this, your balance on your credit cards will become zero, making it appear as if you have more available credit on your credit report – this will raise your credit score as well. 

If you feel very confident that you will able to make the monthly payments on the loan you take out to clear your credit card debt, then you may want to use your house as collateral (i.e. get a secured loan).  However, if you think your medical condition or another life circumstance might prevent you from making monthly payments in the future, take out an unsecured loan to proceed with debt consolidation or leave the debt on your existing credit cards. You definitely do not want to put your home at risk in your pursue to save money by lowering the interest rate on your credit cards.

It doesn’t.  When you choose credit card debt settlement, you withhold payments from your credit card companies, intentionally defaulting on your account, if you have not already done so.  It’s this action that destroys one’s credit score: the charge-off or default record, not the settlement itself.  By defaulting on your credit card account, you hope that at some point your credit card issuers will be willing to settle for much less than what you currently owe them, at which point you will need to be able to offer them a large lump-sum payment.  It can absolve your credit card debts, but there’s no guarantee that your credit card companies will be willing to settle.  Credit card companies are by no means giving away free money.  Once the terms of the settlement are met, the record on the charged-off or default account will read “partially paid,” which looks better than never paid, but it will never read “fully paid” or “paid as agreed.”

Yes.  They can do both.  If your credit card issuer suspects that you have the money to repay your account they can and will sue you.  This usually happens you’re your credit card balance is $1000 or above. In most cases, if you become severely delinquent on payments, your credit card company will close your account and put it into collections.  But the worst thing that can happen if you don’t pay your credit card bill for a long period of time is your credit score being destroyed.  This will make it very hard for you to get approved for credit cards or any other type of loan in the future.    

There are a number of resources available to help you identify accredited credit counselors. We recommend that you contact the following agencies to find an organization licensed to do business in your state:

• National Foundation for Credit Counseling: (800) 388-2227
  • The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation’s largest and longest serving national non-profit credit counseling organization.
• Association of Independent Consumer Credit Counseling Agencies: (866) 703-8787
  • The AICCCA represents the common interests of member agencies to ensure that all who seek help with their debt problems receive the highest quality of assistance.

The following national, accredited credit counseling agencies can also provide you with counseling services: