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Zhi Finance » Common Credit Card Debt Settlement Mistakes

Common Credit Card Debt Settlement Mistakes

Paying off credit card debt can be so damaging to your financial situation that you often resort to whatever techniques or methods you need to get out of this trap. However, you need to be methodical and analyze your decisions in dealing with debt settlement because they can affect your long-term financial position. In addition, legal complications may get in your way, and that is the last thing you want to happen because your credit card debt balance is already growing.

If you want a good credit card debt settlement, you must try to avoid the following methods or mistakes. Most of them will point out what you should avoid if you don’t want your credit card debt to continue to escalate.

Closing your account

Some people get very fed up with their credit card debt because they cannot meet the rising interest and debt balance settlements. As a result, most people choose the easy way out, which is to close their accounts. While this solves one aspect of your problem, it provides another dilemma. Doing so can cause your credit rating to drop significantly.

Here’s a solution for you to try. If you have determined that you do not want to use these cards, then set it aside. You need to actually honor your commitment to not make any more purchases with the cards, as this can easily add to your debt. Also, make sure to continue to settle any other existing credit card debt while you help yourself by not adding more damage.

Debt consolidation

Debt consolidation is a debt relief option that has become quite popular among people with debt problems. While this has helped a few people settle their debts and get back to a smoother financial position, it is not always the best option for discharging debt. If you are not familiar with this method, debt consolidation means that you find a new creditor that is willing to pay off multiple of your existing debts. You must then now work through your new creditor to settle those accounts. Debt consolidators offer the convenience that you now have only one debt to settle, not multiple. It is also possible to negotiate a lower interest rate for your debt, but this will extend the life of your loan and the payment period.

Of course, these debt consolidators will not do this if it is not in their best interest to do so. The debtor will get some upfront fees from the consolidation company, and the statement that there is “third party assistance” will be reflected on your credit report.

Paying high interest rates

This is an obvious mistake that most debtors often make when trying to settle credit card debt. Since it is also in your credit card company’s interest to be able to settle all of your debt balances, then you need to negotiate a meet point when it comes to achieving your interest rate. Once you have agreed to a lower interest rate, consider paying on time to avoid adding more late payment fees to your balance.

Choose to settle the minimum balance

This is a common mistake people make when paying off their credit card bills, which often leads to increased credit card debt. When you use your credit card to make purchases, it’s easy to believe that you have unlimited funds. That’s when overspending comes into play, creating unimaginable credit card debt. If you only pay the minimum balance, your creditors could care less because they will get a percentage of the interest. If you can, try paying twice the minimum amount to mitigate your interest, which can really hurt your debt and financial situation.