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How to negotiate with your credit card company

If your monthly credit card payment rivals your mortgage or rent, or if high interest rates are making it impossible for you to get rid of the debt, it might be time to negotiate with your credit card company.

According to Experian’s 2016 State of Credit data, American consumers had an average credit card balance of $5,551. With a median household income of $59,039 in 2016, it’s likely that most Americans use a substantial portion of their earnings to pay down consumer debt.

But when this debt becomes an unbearable financial burden, what can you do? One option may be to try to negotiate with your credit card company.

Credit card debt is typically unsecured debt, meaning a credit card company can’t come after your assets if you fail to pay what you owe. Since credit card companies don’t have this recourse, many are willing to negotiate a settlement with customers to recoup as much of the debt as possible.

“Credit card companies are about collecting the money. They’re going to size this up and if they say, ‘This is a person who sounds like a good risk and is likely to eventually repay this bill,’ then they’re likely to make concessions,” says Mike Sullivan, a personal finance consultant with Take Charge America, a national nonprofit credit counseling agency.

If you’re drowning in credit card debt, it may take a phone call (or several) to your credit card company to devise a workable solution. Don’t know where to start? Here’s a guide for how to negotiate with your credit card company.

Step 1: Understand how much you owe

The first step is to assess your credit card debt. If you have multiple credit cards, go through your statements and make an itemized list of how much you owe on each card and the respective interest rate.

Also jot down the customer service phone numbers. Now you’ll have all this information stored in one place once you’re ready to call your credit card companies.

Step 2: Explore your options

Before you pick up the phone, understand what settlement options are available and how much you can afford to pay. Each choice can affect your credit scores, and some may have tax implications. The most common settlement options are described below.

Workout agreement

With a workout agreement, you can ask your credit card company to do the following:

  • Waive or reduce the minimum monthly payment
  • Lower your interest rate
  • Remove past late fees

These actions can reduce your overall debt and help you pay off the balance in a shorter time frame. If you have some money coming in but not enough to meet your current monthly obligation and are facing longer-term financial challenges, then a workout agreement may be a good option.

Lump-sum settlement

This option involves negotiating with your credit card company to pay less than you owe. However, it only works if you have access to a significant amount of cash that you can use to pay the card company upfront.

Your credit card company may agree to reduce your debt to the principal you owe.

Hardship plan

If your financial difficulty is due to job loss or a serious illness, your credit card company may be willing to put you on a hardship plan. This is an arrangement that may lower your card’s minimum payment, interest rate and fees. The hardship plan will also typically include a structured payment plan.

Consumers who have temporary financial challenges should consider asking their credit card company if they have a hardship program.

Debt management

Nonprofit organizations like the National Foundation for Credit Counseling offer debt management programs. Under a debt management plan, the credit counseling agency works with you and your creditors on a financial plan. You deposit money with the credit counseling organization each month, and the organization uses your deposits to pay your creditors on schedule.

These programs do have qualification requirements and there is typically a fee. One typical requirement is that you must be able to pay off the debt in 60 months or less.

Debt settlement

For-profit companies offer to negotiate with your credit card company and try to get them to agree to a “settlement” to resolve your debt (typically, the “settlement” is a lump sum payment that is less than the full amount you owe).

With this arrangement, a consumer pays a debt settlement company a monthly payment. The company puts that money into an account. When the company reaches a settlement amount with the creditor, the funds are withdrawn — along with the settlement company’s service fee — and the creditor is paid.

However, because of the associated fees and detrimental impact on your credit scores (more on that later), using a debt settlement company should be considered a last resort before filing for Chapter 7 bankruptcy.

Common Question

Should I choose debt management or debt settlement?

If you qualify for a debt management program, this is the better option because less costly and doesn’t hurt your credit scores as much as debt settlement.

Step 3: Understand the risks

All these negotiation options come with downsides, and it’s important for you to be aware of them. The settlement you choose will depend on your financial situation.

With a workout agreement, your credit card company will likely cut your credit line, rendering your card unusable. This also will ding your credit scores because it lowers your available credit and increases your credit utilization ratio, which is the amount of debt you owe compared with your available credit.

Depending on how your credit card company reports the debt to the major credit bureaus, a lump-sum settlement can affect your credit scores.

If they report the debt as “settled” or a “charge-off,” which is debt that is at least six months delinquent and likely won’t be paid, then your credit will likely be negatively impacted. If the company reports the debt as “paid as agreed,” “current” or “account closed,” there may not be a negative effect on your scores.

There are tax implications too, since forgiven debt of $600 or more may be considered taxable income, Sullivan says.

A hardship plan may also affect your credit scores, depending on how it’s reported to the credit bureaus. And your debt is deferred — not forgiven — so you still must pay it.

Many credit counseling organizations offer debt management programs for a small monthly fee, and negotiating this way generally doesn’t hurt your credit scores (but your credit reports may indicate that you are enrolled in a debt management program).

“I would tell consumers who want the least impact on their credit scores to go to a nonprofit debt management company rather than a settlement company,” Jacob says. “The consumer pays back the entire amount borrowed, so the creditors realize that working with us is to their advantage.”

On the other hand, a settled account can remain on your credit reports for seven years, which makes it challenging to take out a future loan, Sullivan says. It also can hurt your credit scores significantly because you aren’t issuing payments, making it more likely your account will go into collections.

Also note that debt settlement companies charge hefty fees for their services. Keep in mind your forgiven debt may be considered taxable income as well.

Step 4: Call your credit card company

“Consumers can use a settlement company [to negotiate], or they can do it on their own,” says Linda Jacob, a financial counselor with Consumer Credit of Des Moines. “There’s no need to pay a company to settle for you. Save the fees and do the work yourself.”

If you’ve decided to negotiate on your own behalf after weighing your options, it’s time to call your credit card company. First, ask for the department that handles debt settlements or collections. You may want to prepare a script beforehand so you know exactly how to frame your request.

Clearly and politely explain your financial situation and ask for exactly what you want. The initial answer may be no, but that doesn’t mean you can’t be persistent — even if it takes multiple phone calls.

Document every conversation you have. Write down the names and job titles of anyone you speak to so you can reference them in follow-up calls if necessary.

“You can’t be afraid to ask for a supervisor or the supervisor’s supervisor,” Sullivan says. “The higher you go, the more likely you are to find someone who is willing to make a concession.”

Step 5: Get everything in writing

Once you’ve found someone at the credit card company who is willing to negotiate, make sure you get the terms of the deal in writing.

The credit card manager you made a verbal agreement with may leave the company or your account may accidentally be sent to collections. Anything can happen, so protect yourself by putting it all on paper.

Bottom Line

 Having deep credit card debt can feel as if you’re in financial quicksand — the harder you try to get out, the more futile your efforts. Among the five options we listed, you’ll have to weigh the financial pitfalls and impact to your credit before you decide which is the best way to settle your debt.

However, Jacobs and Sullivan say not to discount tried-and-true money management strategies before declaring bankruptcy or paying a debt settlement company.

These management strategies include sticking to a strict budget, getting part-time work to boost your income or negotiating lower interest rates and monthly payments. For consumers at the end of their financial rope, “all of this can alleviate the debt without trashing their credit,” Jacob says.


Debt Relief Programs

Debt Relief is more important now than ever before. Across the country, millions of people are finding it more and more difficult to meet their financial obligations. As mortgage interest rates rise, Adjustable Rate Mortgage (ARM) payments skyrocket. Credit card late fees continue to climb higher.

Lenders keep offering credit to people who are in desperate need of help, but this only prolongs the problem, and often ends up simply increasing the total debt owed by a person. Thankfully, there are a number of opportunities available if you find yourself in this situation. Debt Negotiation, Debt Settlement, Repayment plans, and Debt Consolidation are just some of the options you can pursue.

However, not all debt relief companies and plans are the same. You need to find the right debt relief solution, and just as importantly, the right debt relief company, to work with in order to address your financial needs.

With all the debt-related offerings available, it can sometimes be confusing when examining the different debt relief programs and companies. When comparing your debt relief options, there are a number of important features you should consider. Some of these include:

  • Solutions.  Does the company only offer one debt relief solution? Or are they well-versed in a number of options? Having a variety of choices means they can find the right debt relief program that fits your specific needs.
  • Cost.  How does the debt relief company get paid? The best ones will earn their money from a percentage of what they save you; that way, they only get paid if you save money.
  • Dependability.  There are many fly-by-night debt relief organizations out there. How long has the company been in business? Are they affiliated with the BBB (Better Business Bureau)? Is this a company you can trust? has reviewed and ranked the best debt relief programs available today. We hope these reviews help you in your quest to become debt-free!

National Debt Relief specializes in creating custom financial solutions for customers with $7,500 or more in unsecured debt. They take a proven, thoughtful approach in developing their personalized debt relief plans, and have helped over 100,000 customers get out of debt since 2009.

The National Debt Relief website is clean and customer-friendly. To start, you simply fill out their online form or call their dedicated debt help line at 1-888-979-9776. You’ll discuss your financial situation with one of their certified debt counselors, who will walk you through a free debt analysis. Their staff is knowledgeable and friendly, and together you will create a plan to pay off your debts for less than you owe. Best of all, you can get started on your plan with no upfront fees.

The professionals at National Debt Relief are experts at debt settlement and debt negotiation. They have many debt settlement letters proving how they’ve saved their customers thousands of dollars. Of course, the amount of savings can vary from customer to customer based on a variety of factors. Once you create your custom debt relief plan with them, they’ll be able to tell you how much you can expect to save in your situation.

One of the things we liked about National Debt Relief is that they’ve earned an “A+” rating as an accredited business with the BBB. Part of this rating is due to their 100% customer satisfaction guarantee. If you’re not happy with their service, you can cancel at any time without penalties or fees. This is another strong feature that separates National Debt Relieffrom most other debt relief companies.

For people suffering under a large amount of debt, National Debt Relief is a fantastic option. Their knowledgeable, friendly approach has a proven track record of success, while their strong BBB rating and satisfaction guarantee confirms their focus on the customer. If you want to get out from under the debt load you’re facing, National Debt Relief (1-888-979-9776) is a great place to start. They earn our highest rating.

Specializing in providing financial solutions for total unsecured (or tax debts) of $10,000 or greater, the founders of CuraDebt have been in business since 1996 providing financial advice along with creditor negotiations, settlement, and arbitration services to both individuals and small businesses. CuraDebt expanded nationally in 2000 through their web presence and has successfully helped thousands of people escape their debt issues.

On your initial free, confidential consultation, CuraDebt takes the time to understand your current financial situation, as well as your short-term and long-term goals. CuraDebt has access to the top A+ rated professionals and companies in the industry. Based on a thorough understanding of what you want to accomplish, CuraDebt will connect you with the right staff that can best help you reach your goals.

In addition to debt negotiation and debt settlement, CuraDebt counselors can help advise regarding debt consolidation plansdebt management plansconsumer credit counselingtax debt relief, and more. Their skilled professionals are knowledgeable about each of these services, and can review the best options with you.

If you sign up with CuraDebt’s online form, make sure you provide a valid phone number and email address. With your initial call, you’ll be assigned a friendly, experienced financial counselor to help guide you through your financial options. This person develops a knowledge of your personal financial situation and works with you to create a comprehensive solution to meet your needs. They also stay in contact with you while you progress through your debt resolution plan, until you’ve reached your financial goals. This is a great benefit, since your goals may change and it’s good to have a familiar, knowledgeable expert readily available to answer any questions you may have.

If you have unsecured or tax debts totaling $10,000 or more, CuraDebt is a terrific choice. They are experts in a wide variety of debt relief options and can provide you with a comprehensive solution that meets your needs. With knowledgeable counselors, extensive resources, and proven results, this dependable company earns an excellent rating.

Note: CuraDebt services are not available to residents in the following states: CO, CT, GA, IA, ID, IL, KS, ND, NH, SC, VT, WA, WI, WV.

LendingTree is one of the most recognized names in the personal loan market. They connect borrowers with a wide variety of lenders that can meet their debt relief needs with loans ranging from $1,000 to $35,000.

As a connection service rather than a direct debt relief lender, the loan products that LendingTree offers and their terms and conditions naturally vary with each individual lender. One advantage of using LendingTree is the ability to survey multiple lenders’ debt relief offers without having to disclose one’s personal information to those lenders. You only have to make yourself known when you’ve made the decision to apply for the loan that best fits your debt relief needs. Borrowers can also use offers obtained on LendingTree to negotiate directly with lenders; LendingTree provides customers with lenders’ direct contact information for that very purpose.

If you choose to research debt loans using LendingTree, be aware that you will need to provide your credit score, which is used by lenders to determine if they would like to compete for your business. Even if you have a low credit score, you may still receive loan offers, because LendingTree works with such a large variety of lenders.

One thing to note is that LendingTree’s main website takes you to the page for entering your information to get started in the loan process. Other than that, there is very little information on that page. We were able to determine that entering your personal information will not impact your credit report or your credit score, although we would have liked to see that fact clearly spelled out on LendingTree’s landing page.

With a solid A+ rating from the Better Business Bureau, reliable history, and its ability to connect debt relief borrowers with a wide range of potential lenders, we give LendingTree good marks.

Accredited Debt Relief is a reputable company that helps customers reduce their debt obligations by matching them with partner services. Just by looking at their “Proven Results” page, it’s easy to see the advantages of working with ADR. For example, their customers with debts owed to Bank of America were able to reach settlements that saved them anywhere from 52-80% of the original amounts owed. Similar results are listed for clients of HSBC, The Home Depot, Sears, and many other businesses. According to the fine print at the bottom of the page, Accredited Debt Relief tells clients to expect to pay up to 75% of their enrolled debt balance, which includes any fees charged by ADR’s debt relief partners, over the course of two to four years.

To get started with Accredited Debt Relief, you’ll need to enter your first and last name, email address, state of residence, phone number, and the amount of debt you’re looking to manage (from $1 to over $100,000). You’ll receive a call from one of ADR’s representatives, and you are asked to have a recent copy of your credit scores and credit reports on hand to prepare for the discussion. You can get that information for free on the page after you enter the information described above, by clicking on the “Get My Free Credit Scores Now” button. During the phone call, the debt specialist will go through your credit profile, to get a feel for your situation and help you to understand the available options.

We were impressed by the overwhelming number of customer reviews that described Accredited Debt Relief’s representatives as kind, knowledgeable, and patient. Although they do eventually wind up handing you over to a partner company at some point during the process, since ADR is not a relief company in itself, it’s good to know that people are in good hands from the start. Their A+ rating with the Better Business Bureau is further evidence that they deliver what they promise.

Our main reason for not giving Accredited Debt Relief a score higher than 3.5 stars was a lack of information on their website. Most of their higher-ranked competitors provide details as to the average fees charged – either by themselves or by the debt relief companies with which they partner – so that prospective clients can get an idea of those rates before making that first contact. Also, the ADR site says in multiple places that they operate in “most states”, but that their service is “not available in all states and [their] fees may vary from state to state”. It would save customers time if they knew in advance that their state is not one of those covered by Accredited Debt Relief’s services.

Overall, Accredited Debt Relief demonstrates a great track record for quality customer service as they connect people with debt relief services.

Franklin Debt Relief is located in Chicago, Illinois and was incorporated in 2006. They work with clients that have unmanageable unsecured debt but do not specify the minimum requirement. The website is user friendly and informative despite some unprofessional typos. Franklin Debt Relief focuses on debt settlement services and does a good job of outlining the different lingo and terminology often used in the practice of debt relief.

To initiate the debt analysis process with Franklin a customer must simply complete a quick questionnaire and await a call. Another option is to gather statements and records of unsecured debt and call Franklin directly to speak to someone. If you agree with the debt settlement plan, which is outlined by Franklin, you will be asked to stop making payments to creditors and forward all moneys to them to be placed in a trust account. They in turn will accumulate the cash and wait for the creditors to become anxious to settle your debt. In the meantime, interest and penalties occur on any of your outstanding debt, and Franklin Debt Relief takes their cut from your monthly payment.

One of our concerns with Franklin is their customer service team. In our first call we spoke with someone outside of the USA that seemed to not only have trouble speaking and understanding English but had trouble with the company policies. It was a little unsettling that Franklin Debt Relief outsources their customer service team to individuals that may or may not be on the up and up with our highly sensitive financial information.

Overall, we liked the information on the site but found the lack of details to be a little unsettling. We also couldn’t confirm what states Franklin works with and had some concerns with their customer service team. As such, we suggest you choose a company that is more upfront about all aspects of settling your debt.

Getting Out of Debt – The Pros & Cons of Debt Settlement in Texas

If you are swimming in debt, you’re bound to start looking for a way out. Many people see debt settlement –an option that advertises to help you pay off your debt for much less than what you owe– as a way out of their financial woes. However, the truth isn’t quite as simple as all that. Debt settlement isn’t without pitfalls and consequences — and it isn’t for everyone.

What Is Debt Settlement?

Debt settlement is, simply put, hiring a debt settlement company to help negotiate lower payoffs on personal loans, collections, and open accounts like credit cards. Sometimes these companies misleadingly advertise their services as a way to consolidate debt — or “debt consolidation,” — but make no bones about it, this is not a debt consolidation loan. Their main objective is to negotiate a settlement with all of your creditors and lenders.

How Debt Settlement Companies Work

When you hire a debt settlement company you are hiring them to negotiate with your lenders on your behalf. Their job is to negotiate a new, much lower amount for you to pay on the account. In turn, you pay the debt settlement company a monthly payment and they pay your creditors, minus their commission or fee which they deduct from your payment.

When you hire a debt settlement company the first thing they will tell you is to stop communicating with your lenders or collectors. Their objective here is to get your lenders so desperate for some sort of payment that they’ll be more open to accepting a settlement deal. A settlement means that the lender, collection agency, or credit card company agrees to take a significantly lower payoff amount than what you actually owe, wiping your slate clear from the financial obligation.

Pros of Debt Settlement

There’s one obvious pro to debt settlement: a much lower, single monthly payment that you can afford. And, if a settlement is negotiated and accepted, you will pay much much less than you initially owed on the account. Many times this amount is less than 50% of the original debt, which can end up saving you quite a lot of money in the long run.

Cons of Debt Settlement

The cons from going down this road is that your credit score will be negatively impacted until your debts are negotiated and the payments have all been made. This means that you will not be able to obtain new credit cards while going through the process. This also means that if you want to buy a home or refinance your current existing mortgage, you will have to wait until you are finished with the debt settlement program.

In addition, if you want to buy a new or used car, you will have a higher interest rte and monthly payment than if you wait until you have paid all of the settlements and your credit report reflects that your credit card balances are now zero.

You will also be turned down if you apply for a personal loan or another unsecured loan. In other words, if you absolutely need perfect credit and if you will be purchasing big ticket items that a higher interest rate will affect you in a large way, than debt settlement or debt negotiation is not the direction you should go.

However, if you will not be purchasing any large things like a home, boat, or vehicle, than you should seriously consider debt settlement. Once you are finished with the debt settlement program, your credit score will improve dramatically and if you implement some basic credit enhancing strategies, you will start receiving credit card offers in the mail 3-6 months after you complete the program. This time though, you will be much wiser and hopefully more careful as to how you handle credit cards.

Another con is that you have the potential of getting sued on a delinquent account. Lawsuits can easily be avoided by settling the account, but some people are scared that a lawsuit will ruin their credit report or credit score. The truth of the matter is that a settlement on any account means that this particular account is finished and settled and you can never be sued on it.

Finding a company that will assist you in the event of a lawsuit or offers you asset protection is a great way to determine if that company offers a complete type of debt relief service.

Avoid Getting Scammed

It goes without saying that you do NOT want to get scammed by a debt settlement company. Some ways to do your own due diligence when it comes to dealing with debt settlement companies include:

– Ask lots of questions, like how long the company has been in business, what type of training its employees have. You want to go with a company that’s been around and has a staff who understand personal finance.

– Avoid companies that contact you rather than the other way around.

– Read — and understand — the fine print before you sign anything.

– Most companies offer free consultations before you sign anything. Use the opportunity to ask lots of questions and avoid any company that isn’t interested in answering them.

– Settlement companies with a proven track record of getting clients out of debt will have a long line of people willing to testify to that effect. Check the Better Business Bureau to see what people are saying about the company you’re looking into.

– Ask for references from the company so you can speak with former clients of theirs. If they will not or can not offer this, run away as fast as you can. A reputable company can easily locate clients willing to share their success stories with prospective clients.

– Find out if the company has any specialization in the area of debt you have or specializes in the state in which you live. Many companies offer state specific advice because each state has different consumer protection laws and if they can help you implement those laws, it will save you a lot of money and heartache down the road.

The Alternative: Debt Management Programs

Debt settlement isn’t the only option for people who are swimming in debt. If you’ve tried debt management on your own and are still struggling and need help, you may want to consider a Debt Management Program (DMP). DMPs are often run on a non-profit basis through a consumer credit counseling service, and have no motivation other than wanting to see ordinary people get out of debt. The fees are minimal, and much lower than you’ll pay a settlement or consolidation company — and you’ll pay off your debts, typically in less than five years, without all the damage to your credit and credit scores.

Another great thing about legitimate credit counseling services that offer DMPs is that they can also help you evaluate your debt situation, and if you’re not a good candidate for a DMP, they can help you determine if bankruptcy is an option — always a last resort, but there are cases where it’s the only option left.

Before you decide on a credit counseling service, make sure they are legit. You can do this by verifying that they are a member of the National Foundation for Credit Counseling by visiting their website or by calling 1.800.251.CCCS.

Best Ways To Get Out of Debt

Using a HELOC

A HELOC, or a home equity line of credit, is a revolving line of credit secured by equity in your home. That line of credit can be tapped and used for whatever you like; to pay off debt, to buy a car, to pay college tuition, or just to have as an emergency fund. HELOCs are commonly used to pay off credit card debt because the interest is tax deductible and the interest rates are relatively low.

The danger when using a HELOC is what happens if you go into default. Because a HELOC is secured by the equity in your home the bank can foreclose on your house if you don’t pay back the loan. For some people that’s far too much of a gamble just to pay off a little credit card debt.

Using a Balance Transfer

If you’ve got good credit then you’re probably already getting offers for zero percent credit cards. These are tempting, and for good reason. Converting your expensive credit card debt to zero interest credit card debt is a considerable trade off in your favor.

Many of these credit cards allow you to transfer your entire interest accruing balances from other cards AND allow you to make new purchases, all at zero percent interest for some period of time. If you’re disciplined you can use the grace period, normally between 6-12 months, to aggressively attack the balance and get out of the debt.

Using a Personal Loan

A personal loan is an unsecured installment loan. If you’ve got good credit it’s not that hard to qualify for personal loans well above $10,000. If you use the funds from a personal loan to pay off credit card debt then your credit scores should shoot through the roof because you’ll be converting score damaging revolving debt into score benign installment debt.

As far as the cost of the installment loan, it’s possible the interest rate will be considerably lower. If you have good credit you can get an installment loan in the low teens, while your credit card debt might be as expensive as the high 20s. Plus installment loans have a much shorter payoff period compared to credit cards.

How to get out of credit card debt

Just as it takes time and determination to climb a mountain, it takes time and determination to conquer a mountain of debt.

But if you’re equipped with the right knowledge and tools, the journey to conquering that mountain can be relatively smooth. Plus, you don’t have to tackle that mountain of debt alone — credit counselors are available to help.

Beverly Harzog, credit card expert and author of “The Debt Escape Plan,” says that in paying off more than $20,000 of her own credit card debt, she learned that it takes persistence, self-discipline and “a darned good budget” to get rid of that financial burden.

Of course, keep in mind that no two attempts to conquer debt are the same. A debt reduction plan that works for one person may not work for another. And unless you stick to your plan, you’ll likely have a tough time chipping away at your debt.

“There is more than one path to success, so it’s important to know that options are always available when a plan doesn’t work as expected,” says Bruce McClary, vice president of public relations and communications at the National Foundation for Credit Counseling, a nonprofit financial counseling organization.

Common Question

Can you negotiate with credit card companies?

In certain cases, yes. Some companies are open to negotiating lower APRs, better payment options and even debt settlements, though others may have different policies.

What follows is advice on how to get out of credit card debt. Do keep in mind that this advice won’t guarantee success, but it can help point you in the right direction.

How to get out of credit card debt

  1. Evaluate your finances
    2. Prioritize your spending
    3. Create a budget
    4. Free up money
    5. Set a strategy
    6. Seek help (if you need it)
    7. Work on your financial habits
  2. Evaluate your finances

Regina Blackwell, a certified budget counselor at Transformance, a nonprofit credit counseling service, says your first step should be to assess your financial situation.

Create a list of everything you owe, including credit card debt and all other monthly bills, she suggests. This review of your overall debt should include the balance and the annual percentage rate (APR) — the price you’re charged to borrow money — for each credit card.

Looking at each card’s APR will help you decide how to approach reducing your debt. In some cases, you might want to tackle higher-interest debt first to save money on interest charges; in other cases, you might want to give yourself a psychological edge by paying off lower-balance cards first.

What’s the average APR on a credit card?

Next, compare your debt and expenses with your income. In examining your debt and expenses, you should consider items such as rent or mortgage debt, credit card balances, loan debt and grocery bills.

As for your income, take into account your salary, the interest earned on your savings and anything else that generates money.

  1. Prioritize your spending

When mapping out how to get rid of credit card debt, be sure to cover the basics first, says Sean Fox, co-president and CRO of Freedom Financial Network, a financial services company that specializes in debt settlement. Those basics include food, housing and clothing.

Then, Fox says, be sure to pay at least the minimum amount on secured debts. This type of debt is secured by an asset (sometimes referred to as “collateral”) such as a car or home. If you fail to make timely payments on secured debt, you could lose the asset that’s backing the loan, he warns.

Next, tackle your credit card debt. Credit Karma’s Debt Repayment Calculator is a great way to get started on this task and stay on track. Just enter in the balance you owe and the interest rate, then enter your expected monthly payment or desired payoff timeframe to get an idea of how long it will take to tackle that debt.

Also, focus on student loan debt, Fox says. Why? Because the federal government, which backs most student loan debt, has the means to punish you financially if you have defaulted on the repayment of a student loan. For instance, the government can garnish your wages, your tax refunds and your Social Security benefits. If you have a private student loan, the lender can’t go after your wages or Social Security benefits, but they can pursue legal action in court to collect student loan debt.

Consider not using your credit cards while you’re working on cutting your debt. Paying for things with cash or a debit card can ensure that you don’t rack up debt as you’re trying to pay it off, which can be a frustrating and deflating experience.

Most crucially, make sure you’re making the necessary minimum payments at least on all of your outstanding debts.

Balance transfer cards: One way to help pay off debt

Rather than pay interest on your credit card debt, you may be able to transfer high-interest debt to a single credit card with a balance transfer.

Learn how to do a balance transfer in 6 steps

A number of balance transfer cards allow you to pay 0 percent interest on your balance for a set amount of time, so you can pay more money toward your principal and reduce how long it will take to pay off your debt.

A card like the Citi® Diamond Preferred® Card  offers 0% intro APR for a full 21 months on balance transfers with a $0 annual fee. (After that, the variable APR will be 14.74% – 24.74% based upon your creditworthiness.) There is a balance transfer fee of 5%; minimum: $5. All transfers must be completed in the first four months of account opening.

If you need a lot of time to pay off debt without being charged interest, this may be a good option to consider.

  1. Create a budget

Once you’ve prioritized your debts, it’s time to establish a budget. A budget will help you track your spending and get a better handle on how to shrink your credit card debt.

“Stick to your new budget like glue,” advises Blackwell. Online tools such as Mint and YNAB (You Need a Budget) can be useful in setting a budget and making sure you don’t stray too far from it each month.

Fox says creating a budget will guide your decision about what strategy to use for reducing your credit card debt. “Be honest with yourself about your obligations,” Blackwell adds. (Later, we’ll explain in detail how to pick the right strategy.)

  1. Free up money

As you’re adhering to your budget, you might want to investigate ways you can trim expenses and generate more income.

Going without cable TV, kicking your Starbucks habit or canceling your gym membership are just a few ways to trim down your expenses. It’s up to you to decide which luxuries you’re willing to give up and which you simply can’t live without.

If you’re itching for some extra income, give some thought to getting a part-time gig (or “side hustle”) or making money from a hobby, such as designing jewelry. Or perhaps you can volunteer for paid overtime at your full-time job.

“Just make sure you can handle the extra workload, both physically and mentally,” says Blackwell. “Never put your primary source of income at risk.”

And — though it may be tempting — remember to steer that extra income toward your credit card debt, not toward a fancy gadget or trip to Hawaii.

  1. Set a strategy

Strategies for debt reduction come in three varieties: the avalanche method, the snowball method and the blizzard method.

The avalanche method

As explained by Fox, the avalanche method involves paying off the balances with the highest interest rates first. The goal is to erase your debt as quickly and efficiently as possible.

Here’s how it works: Make minimum payments on each of your balances except the one with the highest APR. For the card account with the highest APR, pay the minimum plus any extra you can afford.

“Repeat this process every month until that debt has been paid off,” Fox says. “Then, keep paying the same monthly total, but take every dollar you were using to pay off the highest-interest debt and put that toward paying off the debt with the second-highest interest rate.”

By aggressively paying down your highest interest balances first, you may save hundreds or even thousands on interest charges in the long run. If saving money is your top priority, stick to this strategy until all your credit card debt is gone.

The snowball method

With the snowball method, you pay off the card with the smallest balance first and work up from there, Fox explains. As with the avalanche method, you always make the minimum payments on all your accounts, but then you put any remaining money toward the card with the smallest balance.

After the balance on that card is wiped out, put any extra cash toward the card that now has the smallest balance. This method can help you build the confidence and positive repayment habits you need to eventually conquer all your debt.

The blizzard method

The third strategy is known as the blizzard method. Harzog says this combines paying off the smallest balance first (snowball) and then paying off the highest-interest balance (avalanche).

“The avalanche saves the most money, but some folks prefer a quick win with the snowball method,” Harzog explains. “The blizzard combines both — you get the emotional boost and then you can save money by using the avalanche.”

  1. Seek help (if you need it)

Do you still feel overwhelmed? Then it might be time to seek a credit counseling agency, whose experts can help put you on the right track. A credit counselor will work with you to help improve your financial situation, offering tools and resources to help you gain control over your money.

The Federal Trade Commission suggests finding a credit counseling agency that offers in-person services. Ask friends and relatives for suggestions on which agencies are reputable; your bank is another potential resource.

Common Question

Where can I find a credit counselor?

To get started, check out the nonprofit National Foundation for Credit Counseling (NFCC). Founded in 1951, the NFCC is the largest nonprofit focused on enhancing people’s financial well-being and has network offices in all 50 states. You can contact a NFCC-accredited counselor by calling 800-388-2227.

Once you’ve done your preliminary homework, double-check whether the agencies you’re considering are trustworthy by contacting the attorney general’s office in your state or by reaching out to your local consumer protection agency.

  1. Work on your financial habits

If you don’t alter the behavior that got you into credit card debt in the first place, you might slip back into debt again in the future.

Fox stresses the importance of differentiating between “wants” and “needs.” Do you need food and housing? Definitely. Do you need to pay your bills and set up an emergency fund? Most likely. Fox says these “needs” should take precedence over “wants.”

He also stresses the need to stick to the budget you’ve created. If you’re not keeping close track of your income and spending, you may wind up in debt all over again.

“Staying out of debt isn’t a big mystery,” Blackwell adds. “Account for your money. Live within your means. Don’t spend what you don’t have. After becoming debt-free, apply the lessons you’ve learned and work toward the establishment of healthy financial habits.”

Bottom line

Getting out of credit card debt usually doesn’t happen immediately. If it took you a while to rack up the debt, it may take you a while to eliminate it.

“The most important thing to keep in mind is consistency in making payments on time every month,” Blackwell says.

“Hopefully, once your credit cards are fully paid off, you’ll swear never to go back to the behaviors that led to being in debt.”


Debt Relief Companies

4 ways to tell that the debt relief program you’re exploring isn’t legit.

Facing challenges with debt is stressful enough. From past due notices to collection calls, being in debt brings constant stress. The last thing you need is to add to your stressed by getting scammed. Unfortunately, there are companies out there bent on taking advantage of consumers who are already in a bad situation. They know you’re desperate and willing to do anything to get out of debt, so they use that sense of urgency against you to get money without actually doing anything to fix your situation.

So while debt definitely sucks, getting scammed by a disreputable debt relief company definitely makes it suck worse. The information below is designed to help you avoid getting scammed by a disreputable “service provider.” We identify the four main ways you can spot a scam, so you can find a real debt relief service provider so you can start getting real relief as soon as possible.

Sign of a scam No. 1: To-good-to-be-true claims

“We guarantee we can settle your debt for just pennies on the dollar.”

Ever heard that claim on a commercial on either late night or daytime local television? How can they guarantee something about your debt if they’ve never even talked to you?

The unfortunate truth is that claims that seem to be too good to be true usually are just that. Words like “guarantee” are usually a dead giveaway of a scam unless there is an actual guarantee that they offer – like a 60-day money-back guarantee and it is in writing. Ask any debt relief or debt settlement company if there offer is in writing and see what they say. So if there’s not a formal guarantee statement that’s provided with a bunch of disclaimers and fine print, you’re probably dealing with a scam.

Sign of a scam No. 2: Unsubstantiated claims

This carries on from the first sign of a scam. Unsubstantiated claims are when a debt relief company states a specific number that they can’t back up. For example:

“This program will boost your credit score by 100 points or more over the next year.”

This claim is different from one that’s too good to be true, and it’s harder to spot because it may have a grain of truth to it. For instance, if you’re a consumer with a rock-bottom bad credit score of less than 600 and you take certain actions over the course of a year, there’s a good chance you could build your way to a score that’s 100 points better within a year – with or without their program. However, that claim doesn’t apply to everyone.

Ever see the fine print on commercials that reads something like, “Results not typical”? Well, that’s where this sign of a scam comes in. Any numeric claim that a company makes should be backed up by data. And any representative that works for the company should be able to give you the information that backs up that claim.

Sign of a scam No. 3: Large upfront fees

There are several federal laws in place that prohibit debt relief companies from charging large fees upfront before debt settlement services are rendered. When companies charge fees upfront, they basically make you pay for the initial consultation and all of the paperwork they do on your case. You pay a bunch of money to them to get started only to find out a few weeks later that, “Sorry, it turns out we can’t help you.” They have your money and you’re no closer to finding a solution than you were when you started.

A debt relief company should only be paid once they actually start helping you. So credit counseling agencies should only get paid after your creditors have agreed to allow you to enroll their debt in your debt management program. A debt settlement company should only get paid only after they begin helping you in a tangible way and/or after they’ve settled at least one debt on your behalf. If you’re paying before you see any actual relief or you’re charged large upfront fees without a money-back guarantee or written refund policy, be careful because it’s probably a scam.

Sign of a scam No. 4: No BBB rating

The Better Business Bureau is your best resource when choosing a reputable service provider in almost any area of your life, but especially when it comes to financial services. If the company doesn’t have a BBB rating because they never applied for accreditation, that’s a bad sign.

Of course, if the company is rated by the BBB and it’s rated badly, that’s not good either. You generally only want to work with A and A+ companies to ensure you’re working with legitimate services that work the way they claim they work. But even a B-rated company is better than a company with no rating at all. Avoid no-rating companies altogether and check out the company’s client review with the Better Business Bureau. If a debt relief company has been in business for any length of time, they should have reviews from actual clients.

Just make sure to read any debt relief service provider’s page carefully. Other big warning signs are class action lawsuits by State or the federal Attorney General’s office. You should also be wary if the company has a number of unresolved complaints.

It’s important to note that the one financial relief service where this tip doesn’t work is with credit repair. The Better Business Bureau does not rate any credit repair service because the industry as a whole is so problematic when it comes to fraud and scams. Since disreputable services are so few and far between, the BBB won’t even rate a credit repair company. So if you’re repairing your credit, you may want to figure it out on your own or simply work with a local state-licensed attorney.

The Truth About Bankruptcy

You did everything you could to avoid it. You cut back on spending. You sold stuff to make payments. You’ve been eating rice and beans for months now. But even with all the work, you’ve come to one painful conclusion—you may need to file bankruptcy.

Bankruptcy is confusing, not to mention emotionally devastating. It’s a serious decision, and we don’t want you to have surprises along the way. Here are some things you need to know before you take the first step.

What is bankruptcy?

Bankruptcy is a court proceeding where you tell a judge you can’t pay your debts. The judge and court trustee examine your assets and liabilities to decide whether to discharge those debts. If the court finds that you really have no means to pay back your debt, you declare bankruptcy.

Bankruptcy can stop foreclosure on your home, repossession of property, or garnishment of your wages or bank accounts. Bankruptcy cancels many—but not all—of your debts.

Bankruptcy doesn’t clear:

  • Student loans
  • Government debts like taxes, fines or penalties
  • Child support and alimony
  • Expensive items purchased right before filing bankruptcy like cars, boats, or jewelry

When you file for bankruptcy, creditors have to stop any effort to collect money from you, at least temporarily. Most creditors can’t write, call or sue you after you’ve filed. However, even if you declare bankruptcy, the courts can require you to pay back certain debts. Each bankruptcy case is unique, and only a court can decide the details of your own bankruptcy.

What are the main types of bankruptcy?

There are two main types of bankruptcy for consumers. You’ve probably heard of them: Chapter 13 and Chapter 7.

Chapter 13

Chapter 13 means the court approves a plan for you to repay some or all of your debts over three to five years. You get to keep your assets (stuff you own) and you’re given time to bring your mortgage up to date. You agree to a monthly payment plan and must follow a strict budget monitored by the court. This kind of bankruptcy stays on your credit report for seven years.

Chapter 7

Chapter 7 means the court sells all your assets—with some exemptions—so you can pay back as much debt as possible. The remaining unpaid debt is erased. You could lose your home (or the equity you’ve put into it) and your car in the process, depending on what the court decides. You can only file Chapter 7 bankruptcy if the court decides your income is too low to pay back your debt. This type of bankruptcy stays on your credit report for 10 years.

You’ve probably heard of other types of bankruptcy, like Chapter 11. It’s typically reserved for businesses. You may also hear of Chapter 12 bankruptcy, which is for farmers and fishermen.

For specific information about bankruptcy laws in your area, visit the United States Courts website. There you’ll find information on the process and where to find help in your area. There is a bankruptcy court for each judicial district in the United States—90 districts in all.

What are the consequences of filing bankruptcy?

Let’s not sugarcoat it: Bankruptcy takes a huge emotional toll on a person. It ranks up there with divorce, loss of a loved one and business failure. Beyond the emotional impact, here are other effects of declaring bankruptcy:

Your bankruptcy becomes public domain.
This means your name and other personal information will appear in court records for the public to access. That’s right . . . potential employers, banks, clients and businesses can access the details of your bankruptcy.

Filing bankruptcy is expensive.
Filing fees for Chapter 13 bankruptcy will cost around $310 plus attorney fees, which can be anywhere from $1,500 to $6,000. For a Chapter 7 bankruptcy, you’ll shell out $335 for filing fees and $835 to $3,835 for an attorney.(1)

Buying a home could be more complicated.
Unless you pay cash for a home, it could take one to four years before you qualify for a mortgage loan.(2)

What should I do before I file for bankruptcy?

Filing for bankruptcy is a big deal, so you don’t want to go into the process blind. Here are some things you need to do before you take any action:

  1. Organize your paperwork.

Make a list of all debts, from your mortgage to student loans to child support. For each of those debts, find paperwork to verify the amounts. If you talk to anyone (lawyer or financial coach), you’ll need this information.

  1. Look at options.

Before you file, try your best to pay off your debt. Get on a bare-bones budget. Talk with creditors about lowering interest rates or getting better terms. Move to a smaller place. Get an extra job to pay the bills. You get the idea.

Another option you can look into is debt settlement. There are many excellent and reputable debt settlement companies that will negotiate settlements for dimes or quarters on the dollar for you and help you get your credit card debt, unsecured loan debt, medical bills, and many other debts resolved so you can avoid bankruptcy.

Our strong advice is this: do whatever you can to avoid bankruptcy because this will stay on your record for 10 years and any & all financing you do in the future will have extremely high interest rates that cause you to pay thousands & thousands of dollars in extra money in interest payments.

Look for a debt settlement company that specializes in your state. Look for companies that are fully accredited with the Better Business Bureau and have great reviews. Look for companies that will allow you to speak with clients that they’ve served so you can see how they treat their customers and if they follow through on their promises.

  1. Try financial coaching.

A financial coach can give you a different, unbiased perspective on your financial situation. They can talk with you about alternatives to bankruptcy and create a customized plan to get you out of the red. And they can give you encouragement and that extra kick in the right direction!

  1. Get professional help.

If you’ve done everything you can and still can’t get your head above water, bankruptcy may be your only option. Filing is complicated and involves lots of paperwork and the potential for mistakes. Working with a pro is your best option for walking through the process, but this should be a last resort after you’ve tried other options.

Weighing the Benefits of Debt Settlement

For a fee, consumers can get help negotiating lower debts.

When consumers with mounting debts get desperate, they often turn to what can seem like their last, best hope: debt settlement companies.

Those companies are taking on an increasing number of clients as more consumers find themselves unable to pay their bills. Bankruptcy filings are up 30 percent over last year, and many consumers have so much debt relative to their income that debt settlement companies decline to take them on as clients. (Credit counselors, who focus on financial literacy and rehabilitation rather than negotiating lower payments, often work on those more severe cases.)

For a fee, struggling consumers can hire a company like Integrity Debt Solutions (IDS), which currently works with over 1,000 clients. Gary Wayne, president of IDS, says his clients have between $12,000 to over $300,000 of unsecured debt, which includes credit cards, overdue rent, medical bills, unsecured loans, and utility bills. Mr. Wayne was asked to explain the ins and outs of his business. Excerpts:

How does debt settlement work?
People call us to ask about signing up for the program. We help them start the process of saving money and then contact their creditors [on their behalf]. We usually get creditors to accept a 25 to 70 percent settlement rate. This month, we’re getting a 37 percent settlement rate. The companies are willing to accept that because otherwise, they could get nothing. Generally, at that stage, people are going to go bankrupt, and it’s hard for banks to know what’s going on. Hardship clients [people who are experiencing major life challenges that make it impossible for them to pay their bills] don’t have much money, and sometimes the bank never gets paid.

Do you also help teach clients how to save money?
We don’t give legal advice, but we do tell people how they can save money. We go through their debts and pick which ones they should do first.

Does it hurt a person’s credit score to do that?
It can hurt it temporarily, but in the long run, it’s better to get out of debt. Around 25 percent of clients who get out of debt do it in a year or less. The other 75 percent do it in a two- to three-year time frame. It takes time to build up funds. We stay in touch with our clients about every other month, whether we need to or not, to check in. We often urge people to keep one credit card [so they can build their credit score back up by making regular payments]. It usually takes six to 12 months before they can start rebuilding their score.

Why do you specialize in Texas?
The founders of the company used to work for a nationwide debt settlement company and learned about many of the beneficial consumer protection laws that each state has. It turns out that Texas has some of the most beneficial laws, but consumers are simply not aware of these laws & benefits. We decided to start our own company and educate our clients and implement these protective measures so clients could save more money than other debt settlement programs and have more peace of mind & security.

Why do you offer a money back guarantee and how does it work?
We knew when we first started in 2004, that there were many scam artists & companies out there. We wanted to differentiate ourselves from our competitors and minimize their risk so from the very beginning we had our attorneys include money back language in all of our clients enrollment forms and contracts. The guarantee states that if we cannot reduce a client’s debt by at least 40% (where they pay 60% or less), then they will get our program for free. Of course, we never know for certain exactly where we can & will settle a particular debt for a client, but if we cannot reduce their total debt on all of their accounts combined by at least 40%, then we feel we don’t deserve to get paid. The good news is that we have not had to refund anyone yet – a track record of which we are very proud and working diligently to maintain.

How much does your debt settlement service cost?
We charge 15 percent of unsecured balance you bring in, which can be paid over a period of months and can be customized to what the client can afford. There is no application fee. So for someone with a $10,000 debt, they will pay us $1,500 which can be paid in $100 increments over 15 months.

Do you ever turn customers away?
When we first talk, we go over their debts and income. If they don’t have enough income, we say, “You can’t afford to be in a program like ours. Maybe consumer credit counseling would be better.”

Are There Benefits of Debt Settlement?

When it comes to debt settlement, the benefits really do make it a good option for those consumers struggling with a large amount of debt.

Debt settlement is a debt repayment strategy where you negotiate with your creditors to accept a partial payment as full satisfaction for the debt. If the creditor agrees, you pay just a percentage of your outstanding balance and the rest of the debt is canceled for good.

Outside the debt settlement industry, debt settlement is rarely (if ever) recommended as a viable solution to dealing with your debts. Much of this has to do with the number of debt settlement scams and the miseducation of consumers to the effects of debt settlement. For certain consumers, there may be some benefits to debt settlement.

You Can Avoid Bankruptcy:

The biggest reason that people choose debt settlement is to avoid bankruptcy. Bankruptcy is a debt solution that will follow you for the rest of your life. The bankruptcy entry remains on your credit report for 10 years, but many loan, credit card, and job applications ask if you’ve ever filed bankruptcy. If you answer no and the bank later finds out that you actually did file bankruptcy, you could be found guilty of fraud. In the case of employment, you could lose your job.

Settling debts with your creditors, when it’s done right, can help you avoid filing bankruptcy and dealing with the consequences of a bankruptcy.

Debt settlement will only stay on your credit report for seven years.

There’s no public record of you ever having settled your debts, so once the credit reporting time limit has run on your settled accounts, you won’t have to deal with the settlement anymore.

Relief From Overwhelming Debts:

The goal of debt settlement isn’t to get over on your creditors by paying them only a portion of the debt you accumulated. So it’s unwise to rack up a large amount of credit card debt with the expectation of settling it all.

If you’re legitimately having trouble paying back what you owe, debt settlement may help you. Once you’ve negotiated and paid your settlement, you’re essentially debt free in less time and at a lower cost than if you tried to pay off your debts on a typical repayment schedule.

Comparing debt settlement to bankruptcy, creditors may not get as much from you even if you filed Chapter 13 bankruptcy. They may not get anything at all if you file Chapter 7 bankruptcy. Creditors know this which is why they accept settlement offers from some consumers.

Repay Your Debts in Less Time:

On a good debt settlement program, you will repay your debts in two to four years. This is much less time than you’d spend paying back your debts normally (probably not an option if you’re considering debt settlement). Even debt consolidation, credit counseling, and Chapter 13 bankruptcy have debt repayment periods from three to five years. It might take decades to pay off debt if you stuck to the original repayment schedule.

Drawbacks of Debt Settlement:

Of course, there are negative consequences to debt settlement. Creditors aren’t guaranteed to agree to settlement offers, your credit will suffer in the meantime (if it hasn’t already), and you may owe taxes on the amount of debt that’s canceled.

As with any debt solution, you must weigh the benefits of debt settlement to the negative side-effects.

Why debt consolidation is a good option to get rid of debts

When you are drowning in a sea of debt, then you must try and get out of the situation as soon as possible. For this you may consider opting for various debt solutions. In case the problems that you are facing are due to the multiple number of your debts, then you must consider a debt solution called debt consolidation. However, you must be careful of a few companies that claim to offer you free debt consolidation as there is no such thing. You must choose a debt consolidation company with care.

In case you are not very sure about why you should use debt consolidation to get rid of your debts, then you must look at the various advantages that this process offers.

Some of the advantages of debt consolidation are as follows.

1. Reduced rate of interest: When you opt for debt consolidation the debt consolidation company negotiates with your creditors to get lower rates on interest for you. Thus, the total amount that you would have to pay towards your debts reduces as the interest rate reduces. So, it becomes easier for you to pay off your debts.

2. One monthly payment: After you choose a debt consolidation company, your financial situation is assessed and then a fixed amount is decided that you are to pay to the debt consolidation company every month. Apart from this amount you are not to make any payments. This amount is utilized to pay off all your creditors every month by the debt consolidation company. Thus, you are freed from the hassles of making payments to multiple creditors.

3. Improved credit score: When you opt for debt consolidation, then you send only a single monthly installment to your debt consolidation company. This amount is further distributed by your consolidation company among your creditors after they deduct a certain sum as consolidation fees. Thus, your creditors get paid every month which means that you will get improved credit score.

4. End to calls from creditors: When you have too many debts to tackle, then the huge number of creditor calls that you get may bring great problems in your life. When you opt for debt consolidation, then all your creditors are notified that they are to call your consolidation company in case they have any queries. Thus, your creditors can no longer call and harass you when you opt for debt consolidation.

These are a few reasons for which opting for debt consolidation is a wise decision when it comes to getting out of your debts.

Author’s Bio: M.J loves to write financial articles and she is a contributory writer associated with the Debt Consolidation Care Community and has written several articles on debt consolidation, debt settlement, bill consolidation and get out of debt for various financial websites. She holds her expertise in the Debt industry and has made significant contribution through her various articles.

What Does the Bible Have to Say About Debt Solution? (Part 3)

The Credit Card Story

Boy Reading the holy bibleOur last post discussed Biblical parables and their relationship to debt issues. Check out our previous debt solution articles for more information.

Imagine that you walk into your local bank to apply for a credit card rather than completing an application in the mail or on the internet. For illustration sake, this particular small local branch has $1,000,000 of deposits (actual cash) and you are approved for a $9,000 line of credit.

Because of GAAP accounting (Generally Acceptable Accounting Practices) the minute you are approved for your $9,000 credit card line, the bank will claim this as an asset (this is monetizing your signature – creating new money based on your signature) thus claiming to now have $1,009,000 of assets on the books.

Suppose you max out this $9,000 credit card and, for whatever reason, don’t/can’t pay the balance on the account. Where does that leave the bank? Well, first of all, the bank is allowed to write-off the $9,000 as a bad loan after 180 days and receives their tax deduction/credit. Secondly, after writing it off, they are now back to their original $1,000,000 of deposits they had before you were approved for the account. Thirdly, they did not lose one penny during this entire ordeal. Result: (1) the bank received money from you while you paid the interest on the “debt” thus receiving interest on money they just created; (2) the bank also received a tax deduction when they wrote off the $9,000; (3) the bank did not lose any money because they never had any of their own money at risk.

Our next post will discuss several scripture passages that highlight debt-related issues.

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