Greetings to some awesome women!
Newsletter #13
I recently read a post that said “Doesn’t it seem like June and July lasted but 5 minutes?” and though I can appreciate that times goes by quicker as you grow older, I do have to concur this summer seems extraordinarily fast in passing. So this month’s newsletter is fittingly focused on Back to School, Budgeting with Children in mind accompanied with ways to address mounting credit card bills.
Statistics show that though late credit card payments are still low they have been trickling upward these past two years. According to Experian, May’s average credit card balances have crept up by 53,000. Not a lot but the feeling in the industry is if the economy should slow it could raise difficulties for consumers. We ourselves have seen this steady increase in credit card inquiries and so felt before Fall flashes by in a blink of an eye and the Holidays are upon us, this would be a good time to reintroduce some of our services and some new benefits that have been added to them.
The number one question we get asked when discussing credit card debt is what makes a Debt Management Program (DMP) through a Non-Profit Credit Counselor different from a Debt Negotiating Company who performs Debt Settlements.
A debt settlement company has you stop paying your creditors as they negotiate a lower payment. Then, the debt settlement company pays the creditors on your behalf. Essentially, it seems like you save money and the debt settlement company takes care of getting the payments to your creditors for you.
The catch is that the lower payment they negotiate is lower than your full outstanding balance. This harms your credit score because you are not paying off the total amount. Typically, with debt settlement, you only pay about 50% to 80% of the balance. Additionally, the debt settlement company does not pay your creditors while they are negotiating the lower payment, so you may begin to receive collection calls. The late payments then get reported to the three major credit bureaus (Experian, TransUnion and Equifax) and stay on your credit report for seven years. Regardless of whether your settlement is successful, your credit will be damaged.
Also, keep in mind if the debt is settled for less than the full balance, you may have tax implications because the debt that is forgiven will likely be reported to the IRS as income. Finally, you'll pay hefty fees for this service: You could be charged as much as 15% to 25% of the amount settled.
A Debt management programs (DMPs) are administered by nonprofit credit counseling companies, as opposed to debt settlement companies, which are for-profit. In a DMP, the credit counseling company negotiates with your creditors to reduce your interest rates and fees, or lower monthly payments for you. You still pay off the principal amount, so your credit score is not impacted as it would be with debt settlement. Credit counselors will also help you to improve your money management skills and come up with a workable budget.
Nothing like a quick lesson on how to address credit card debt in time for school. We hope you are having a wonderful summer! May you enjoy these last weeks before another season change and do not hesitate to contact us if you have any questions or would like more information on any of our services.
Until next time, always remember “the choices are always yours to make…because it’s never JUST about money.”
