Settling Credit Card Debt

Credit cards are wonderful things until you find that you have got three or four of them and have run them all up to their limit and are now experiencing difficulties even meeting the minimum monthly payments. At this point most people wonder why they ever let themselves get into this state in the first place and are more than a little worried about the settlement of their debt.

Settling credit card debt can be a complex matter and is rarely a problem which you can view in isolation because your credit cards are often not the only thing on which you owe money. In many cases you will also be running into trouble with paying your store cards, mortgage or rent, car payments, a bank loan, a student loan and perhaps several other debts as well. At this stage however all is not lost and you are still a long way from bankruptcy. So how do you settle your credit card debts?

There is no easy answer to this question because it will depend very much on your particular circumstances. As far as your credit cards are concerned however you will normally find yourself in one of three situations.

Perhaps not surprisingly how you go about settling your credit card debts, and achieving a reduction in your overall debt, will depend very much on which of these three situations you find yourself in.

If you are currently up-to-date but are going to have problems meeting your payments either this or next month then you will need to start by sitting down and drawing up a very detailed budget for the month. This budget need to show all of your income on one side and all of your expenditure, including debt repayment, on the other. You will now need to analyze each item of expenditure carefully and decide whether or not it is essential and, if it is, whether or not it can be reduced, at least for a month or two. You will be surprised how often you can find the money you need by simply cutting back here on there on non-essential expenditure.

If you still cannot balance the books having been through this exercise then clearly something is going to have to give somewhere and a little bit of negotiation is going to be necessary. The first thing you must not do at this point is to simply decide to miss a payment here and there and effectively use the money due to one creditor to pay another. The second thing to avoid is borrowing more money to meet your current debts. Raising more credit when you are having difficulty meeting you current bills is a recipe for disaster.

At this point you need to work out a plan to give yourself some relief and get yourself back on course within a reasonable period of time (say one to three months) and then offer your creditors a plan and ask them for help. People run into financial difficulty all the time and you will be surprised how often your creditors will not only understand this but also be prepared to help you out. If you contact them (this can be done by phone at this stage) and explain your situation they will often be prepared to help you out either by reducing your payments for a short period of time or even giving you a short repayment holiday.

Once you have started to fall into arrears and have missed payments things become a little bit more of a problem but can still often be sorted out without too much difficulty. An important point to remember though is that it is far better to sort out your credit card debts while they are still with the credit card company if you can, rather than let things run on and then have to deal with a collection agency. This can be particularly important if you are concerned about your credit record. You do however need to protect yourself at this point and so we have detailed just how to go about this in a separate article entitled "Negotiating Settlement On Credit Card Debt".

If one or more of your credit card debts have been passed to a debt collection agency for recovery then you will find that the rules will have changed considerably and you will need to approach the debt collection agencies in a very different manner from that in which you would deal with your credit card company. This can be a complex area and so again we have covered it in a separate article entitled "How To Deal With Debt Collection Letters".

One popular method for dealing with credit card debt is to consolidate the debt accrued on several credit cards onto one single low interest credit card. For some people this will work very well, but it is an area which you need to understand fully before venturing down this route. Once more we will look at this is some detail in a separate article entitled "Using A Low Interest Credit Card For Debt Consolidation".

Settling credit card debt can range from being quite simple to extremely difficult but, whichever the case, the secret lies in tackling the problem head on and not in simply sweeping it under the carpet and hoping that it will go away. This said, if your debt is considerable and you have been in debt for a long time then it is just possible that it will go away if you ignore it. This is not to say that we would recommend this as a strategy for dealing with your debt, but it is a fact of the world we live in and so is something which you should be aware of. For more information on this particular subject take a look at our article entitled "The Statute Of Limitations On Credit Card Debt".

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