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Even before the advent of recession and economic downtrend, credit card debt was already a major problem. How to eliminate credit card debt if a person has already developed the habit of buying on credit? Too much use of the credit card resulted to a disproportion between money earned and money spent. Buying things on credit was always higher because of the ongoing interest rates and charges while paycheck increases never came at all. What’s even worse is losing the monthly paychecks for being laid-off.

In the end, as credit bills ballooned reaching amounts beyond the paying capacity of the cardholder, the need to eliminate credit card debt became a monumental task. However, the first thing you should understand is why your credit card debts never seem to go down despite the minimum payments you have made?

Making light payments means a great part of your payment is applied as payment of current interests and charges and is not the best way to eliminate credit card debt. A very minimal amount is applied as payment on the principal amount. Hence, these unpaid principal amounts are carried over as balances for next month’s billing statement. Minimum payments will cost you a lot of interest expenses and will make it even more difficult for you to eliminate credit card debt.

If you will read the fine prints about APRs or Annual Percentage Rate, principal amounts carried over from previous month’s balances are usually charged with higher APR rates and not at all the same APR applied upon purchase. Thus, the best way to eliminate credit card debt is to pay an amount equivalent to all the purchases you bought on credit. This way the higher APR rate will stop running. The next time you use your credit card, make sure it’s only for something that is necessary and for a minimal amount only. Otherwise, you will again be saddled with the problem of how to eliminate credit card debt.

Another common suggestion to eliminate credit card debt is by consolidating all your credit card debts into a single credit card account that has lower APR. This is something that you should carefully look into. Read the fine prints of the credit card’s website about their terms and conditions. In the same way that “balances carried over from previous month” is charged with higher APR, the same is true for balances transferred from one credit card account to another.

In addition, credit card companies reserve the right to increase their APR without prior notification and no such thing as fixed rates will prevail. Hence, you may find yourself dealing with just one high APR in the long run which will make it more difficult for you to eliminate credit card debt. Besides, this will create a bad mark on your credit score because it will appear in credit reports that you have fully maximized the credit limit of a single credit card. In case you closed all the other credit cards, your total available credit decreased yet your utilized amount remains high. Naturally, this will only lower your credit score.

As a summary, the only way to eliminate credit card debt is to eliminate the source itself. It’s not going to earn you high scores either if you use too much of your credit limit.

Posted under Business And Finance

Debt Settlement, debt negotiation, and debt consolidation, are terms used by firms who charge fees to negotiate lump sum settlements with credit card companies. Regrettably, these companies do a much better job of eliminating your worries with a false sense of security than they do of eliminating your credit card debt problems.

A typical consumer in debt cannot afford to pay for debt settlement services AND settle their credit card debts with what is left over. It would cost $2250-3000 to settle some reduction of $15,000 in debt. Debt settlement firms advise you stop paying the credit card companies and to start paying them instead. They take their fees out then wait for enough money to accumulate to make lump-sum payments to the consumer’s credit card banks. But, that typically will not happen until after those debts have been charged off and sold due to non-payment.

According to the New York Times, creditors will not negotiate reduced balances with consumers who are still making monthly payments and balances on credit cards with missed payments swell with interest and fees. The Wall Street Journal reported that some major creditors, including American Express Co., say they won’t even work with debt-settlement companies. Yet, debt settlement firm’s fees are all non-refundable.

The problem is most banks charge off credit card debt after six months of non-payment. If you cannot save enough money within six months of starting the program, then your credit card debts could charge off, leaving a seven year negative mark on your credit report. With a charge off and subsequent sale to a junk debt buyer there is no more leverage with the original creditor, the credit card bank, to negotiate away a negative credit report listing.

Junk debt buyers buy bad debt from credit card banks in large chunks for 10 cents on the dollar. If a consumer has continued paying into a debt settlement program, by the time there is money for a reduced settlement, the original creditor no longer owns the debt. Then it is time to use consumer protection laws like the Fair Debt Collection Practices Act to fend off these parasites, according to the Credit Card Debt Survival Guide. If the consumer is unwise enough to settle with the junk debt buyer, the debt buyer will simply sell the unpaid balance to another junk debt buyer who will resume collection efforts.

Eliminating credit card debt through debt settlement is best accomplished on a do-it-yourself basis. Consumers must be ready to present a need-based case for a reduced balance settlement, according to the Credit Card Debt Survival Guide.

Matt Highlander writes for the Credit Card Debt Survival Guide. If you are searching for credit card debt relief, read about proven strategies for settling debts and handling debt collectors as well as collection attorneys.