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Managing and Lowering Credit Card Debt with a DMP

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The average credit card debt after removing the worst indebted households in the United States is more than $7,000, and the average monthly credit card payment ranges between $200 and $250 a month or roughly $3,000 a year not including over the limit fees and late payment fees. For a significant number of households, paying credit card debt is a true burden. Thankfully, there are debt management plans that can help you lower your balances and pay off your debt.

debt management plan

Benefits of Debt Management

  • One monthly payment
  • Works with your budget
  • Defined financial goals
  • Fewer calls from debt collection agencies
  • Improved credit score and debt to income ratio
  • Debt counselling

Debt Management for Credit Card Debt Reduction
Debt management plans are custom designed for your specific set of circumstances. Professional debt management councilors examine all of your unsecured credit card debt, your income and your monthly expenditures. From there, the company will help you create a budget to reduce your debt and ease your monthly financial burden. They will also educate you on unsecured debt, income and managing your finances.

Once the company has all of your credit card information, they will call your creditors on your behalf and start negotiations. These calls are designed to reduce your interest rates and the fees associated with your account. This task usually lowers the amount of your monthly payments and allows more of your payment to go towards the principle, which results in lower interest fees at the end of each month. It also reduces your monthly expenditures and leaves you with more cash in your pocket.

How Debt Management Payment Plans Work
After negotiations, the debt management company creates a single monthly bill that comprises the payments for all of your accounts. All you have to do is write one check per month and mail it to the management company. From there, the company splits the payment, according to the amounts owed on each of your credit cards, and mails the payments on your behalf, which is typically much simpler than writing and mailing multiple checks or logging into multiple accounts to pay your bills.

Over time, you will see your credit card balances go down and your overall household debt reduced. During this process, it is still wise to keep abreast of your credit card accounts and make a note of when each account is paid off.

Once an account is paid off and closed, contact your debt management company and let them know. Often times, you will be given the option to keep paying the same amount or reduce your monthly payment. Most debt management companies recommend you keep paying the same amount. This allows more money to be put towards your remaining debt, which reduces your outstanding debt even faster. Additionally, you can make payments that are more than your minimum monthly amount when you have extra cash.

To learn more about debt management and how it can help you lower your credit card debt, contact our friendly professionals at Rescue One Financial.


When is Credit Card Debt Too Much?

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There are many factors that come into play when discussing a person’s debt load. Every situation is different. Still, there are ways to determine whether your credit card debt might be too high.

Debt-to-income ratio
too much credit card debtA simple and quick way to get a sense of whether you have too much debt overall is to calculate your debt-to-income ratio. A debt ratio is simply the percentage of income that goes toward paying your monthly debts. To calculate it, simply add up your ongoing monthly debt payments – typically credit card, auto loans, personal loans and student loans. Then, divide the sum by your monthly income after taxes and other deductions – your take-home pay. A quotient of 0.10 or lower means you’re spending 10 percent or less of your monthly take-home on debts. A result higher than 0.10 is a warning sign. Also, If your debt load is negatively impacting your credit score – you’ve been turned down for new lines of credit – overall, you probably have too much debt.

Credit card warning signs
First, it’s important look at interest rates. Chances are you’re paying a much higher interest rate for credit card debt than you are for other debts. If your credit cards are maxed-out, and all you can handle is the minimum monthly payment, you’re only paying a very small portion of the principal on your debt. It will take years to pay off even a small debt with this approach, and you’ll end up paying more in interest than the original expenditure. If creditors are hounding you because you can’t make your payments, and you’re not expecting a large infusion of incremental cash any time soon, you can be certain you have too much credit card debt.

Negotiating with the bank
Banks are smart enough to know that someone with high credit card debt can’t just pull the money out of a hat. If you find yourself unable to make your monthly payments, don’t assume the situation is hopeless. Most banks would rather have you contact them, explain your situation and request assistance than have you go off-the-grid. It can be as simple as asking for a reduced interest rate, or requesting a temporary payment reduction. If your dilemma is longer term in nature, and outside factors are in play – like unexpected medical bills – you may want to ask the bank if it will accept a lump sum settlement payment for something less than what you owe.

Getting good help
If those attempts fail, it’s time to enlist the services of a debt management and resolution company. like Rescue One Financial that has professionals on hand who can develop a plan to get your credit card debt under control. They might be able to help you negotiate reduced balances or debt settlements on your credit cards. Similarly, it can advise you on the most effective way to consolidate your debts. It may be possible to get a new line-of-credit at a substantially lower interest rate than your paying on your credit cards, in which case you could pay off your credit cards, consolidate your debts at a lower interest rate, and reduce your monthly payments.


How to Use a Credit Card Without Going Into Debt

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A credit card can be a useful tool in your quest to spend money and manage your finances. While they have long been demonized as tools that put you into debt, this doesn’t have to be the case. How can you use a credit card without going into debt?

Make the Full Payment Each Month
Use a Credit Card Without Going Into DebtPaying your balance in full each month eliminates the need to pay interest on your credit purchases. It also ensures that you don’t carry a balance from month to month that will have to be repaid at some point. While it may not seem like a big deal to keep $50 or $100 a month on your card, that could add up to hundreds or thousands of dollars over the course of a year.

Don’t Make a Charge Unless You Have the Cash to Pay it Quickly
Many people use credit cards to rack up rewards or cash back that can be used for rewards. If you are going to use a credit card to get cash back from your credit card company, make sure that you have the cash to make the payment before the end of the billing cycle. If given the opportunity, you may wish to use your cash back as a credit toward your monthly payment. This gives you the chance to earn rewards that you may use in the future while ensuring that at least part of your credit card bill is being paid.

Use Balance Transfers to Keep Interest Charges to a Minimum
Instead of paying 20 percent interest on your balance, you can use a balance transfer to keep your interest to as little as 0 percent monthly. On a balance of $100 or more, this could lead to a tangible savings that can make it easier to pay off your bill each month or within a reasonable amount of time. In many cases, people have a hard time paying off their bill and rack up a large debt mostly due to rising interest fees.

Look for a Credit Card That Doesn’t Impose Late Fees or Interest Rate Hikes
Many credit card companies will raise your interest rate or charge you a fee of up to $35 if you are as little as a day late with your payment. While you may be able to plead for leniency with the credit card company, this is not always an option. Therefore, it is important to make sure that you aren’t charged a late fee or any other penalty in the first place. Those who have good credit may find it easier to find such a card.

Your credit card company is going to want to charge you as much interest as possible. While this is good for them, it is bad for you. Therefore, make sure to get a card that either doesn’t charge a lot of interest or pay off the bill before interest is charged. This may enable you to get the most from your card without having to pay a lot of those rewards.

However if you end up racking up debt due to credit card usage, contact the professionals at Rescue One Financial, we can help you regain you financial freedom.


How To Stay Out Of Debt With A Credit Card

Credit cards often receive a lot of negative attention. However, they can actually be very useful if they are used the right way. In fact, credit cards can help you build your credit. There are several things that you can do to use your credit cards responsibly and stay out of debt. Below are some tips for avoiding credit card debt:

stay out of debt with credit cards

Build Up Your Emergency Fund
Many people use their credit card when an unexpected expense arises, such as a medical bill or a major car repair. One of the best things that you can do to prepare for an unexpected expense is to build up your emergency fund. Try to deposit some money into your savings account every week. This can prevent you from needing to use a credit card if you are hit with an unexpected expense.

Make All Payments On Time
This seems common sense, but it is one of the best things that you can do if you want to avoid credit card debt. When you miss payments, your balance will increase because of late fees. Your credit card company may also increase the interest rate and raise the minimum payment. It is definitely in your best interest to make payments on time.

Pay The Balance Off In Full Every Month
This is a sure-fire way to ensure that you stay free of credit card debt. If you pay your credit card balance off in full each month, then you will be able to avoid paying interest. One of the reasons that many people have trouble paying off their credit card debt is because of the interest rates. If paying the credit card balance off in full each month is not a feasible option, then you should consider paying more than the minimum payment. You will be able to pay your card off quicker and avoid accumulating debt.

Be Cautious About Applying For New Credit Cards
Many people apply for new credit cards so that they can have more credit in their name. While increasing your available credit can help you increase your credit score, applying for new credit cards is not always a good idea. You may be tempted to spend more if you have a lot of credit. Furthermore, your credit score is impacted every time that you apply for new credit.

Only Charge What You Can Afford
Any financial expert would tell you that if you cannot afford to purchase it with cash, then you should not pay for it with your credit card. Far too many people use credit cards as a source to fund things that really cannot afford. You can avoid credit card debt if you avoid charging anything that you do not have the money in the bank to purchase it.

Millions of people struggle with credit card debt. However, if credit cards are used wisely, then people can avoid getting themselves into debt. If you need help paying off credit card debt or want more information, contact the credit card debt professionals at Rescue One Financial.

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How to Lower Credit Card Debt with Debt Management

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The credit card system is stacked against you. With an average interest rate of 13.02% and companies that encourage you to only make the minimum monthly payment, it is easy to get trapped in what seems like a never ending cycle. Debt management is just one tool that may help get you out of the trap and back on the road to a debt free lifestyle.

Lower Credit Card Debt with Debt ManagementWhat Is Debt Management?
Debt management programs are independent companies who help you negotiate with the credit card companies. You will send one monthly payment to the debt management company who will then distribute that payment amongst the credit card companies that you owe money to. This is not a separate loan that buys out your debt like loan refinancing; they are simply advocating for you and delivering your payments.

What Are The Benefits?
A debt management company will take over negotiations with credit card companies. Many people don’t even know that credit card companies may be open to negotiation and those that do are still in a weaker bargaining position, since they are both using their services and owe them money.

The debt management company is an outside force that is experienced in negotiating with credit card companies to get you a more manageable deal. This can include lower interest rates, more flexible payment levels, and a removal of fines and fees. A lower interest rate will allow you to pay off more of the principle each month, letting you get out of debt faster. The credit card companies are often willing to negotiate, since the money they get from a repayment plan is far greater than what they will get if you default on the loan or declare bankruptcy.

Having one monthly payment to the company can also help if you have difficulty keeping track of your payments each month. This will ensure that nothing gets missed and you don’t accrue more late fees or penalties.

What Can I Expect?
Generally you will not be able to keep using the cards that are being handled by the debt management company. The credit card companies will often allow you to keep one card open for emergencies, but all other lines of credit will generally be closed, giving you a chance to get on top of the debt without adding to it.

Most people who enter debt management pay their debts off in three to five years, setting themselves up for a much stronger financial position. Considering the effect being debt free can have on your finances, that is not long to wait.

Debt management can have an affect on your credit score, depending on the agreement with the credit card companies. However, making regular payments and getting out of debt will do a great deal to boost your credit back up. Many debt management companies will offer you advice on how to increase your credit even more once you have gotten out of your credit card debt.

Don’t allow yourself to stay in the vicious cycle of credit card debt. However you choose to get out of debt, starting now is the best thing you can do for your financial future. If you would like more information about debt management, you can contact the professionals at Rescue 1 Financial.


How Do Debt Settlement Companies Negotiate Credit Card Debt

If you have credit card bills that are mounting each month, you need a good solution. It is easy to miss a monthly payment and eventually have to pay twice as much on the bill. There are debt settlement companies willing to help you in this situation. First, figure out how debt settlement companies negotiate credit card debt. Then, find out whether or not you need one of these companies to manage your bills.

credt card management company

Encourage Savings
Debt settlement providers are available to help you settle debts. In addition, these professionals encourage you to improve your savings. A typical settlement is just a lump sum that is not the original amount that was agreed upon. A new budget is created to suit your affordability. Each month, you are encouraged to save for the next few years. It is important to work closely with a settlement provider who you can actually understand and trust.

Reduce Payments
Get the right settlement with the help of professionals. Reduce the payment and interest rate that you pay every month. When you have money to pay, avoid the late fees or overcharges. The catch is that you no longer have access to a high credit line. Also, your credit rating may suffer with this arrangement. Overall, you make affordable payments, but you have reduced access to credit.

Cut Debt in Half
Cutting your debt in half is possible. Settling debt is designed if you have extreme hardships like:

  • lack of employment
  • divorce
  • medical issue
  • inadequate savings

As a debtor, you have rights and can cut bills in half; however, your credit score is affected. Also, debt settlement providers take in a percentage of the negotiated settlement.

Offer a Lump Sum
One way that you can negotiate is to offer to pay a lump sum. Have a professional inform the credit card company that not settling could lead to bankruptcy. Give a lump sum that is half or less than half of the total debt. Pay as much as 20 to 50 percent of the total fee. Pay a lump sum whenever you can as part of a good negotiation.

Agree Not to Involve a Collection Agency
Request that your credit card company does not get the collection agency involved. That means having to sell off your debt before or after you make a settlement. If the debt is sold, you have to pay additional fees and get a bad credit report. So, agree to pay off the rest of the balance right away without getting it sold.

If you are drowning in credit card debt, find a company willing to guide you to a better way. There are many people with severe credit problems who do not know where to turn. You do not have to settle for bankruptcy. Instead, work with a credit card company by drawing up a negotiation. With the help of a debt settlement company, create the best deal to pay off all of your bills. Need help, contact Rescue One Financial!

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Can Wages Be Garnished for Unsecure Debt?

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When debt gets out of hand, wage garnishment is a legitimate fear. However, knowing the “rules” regarding garnishment can alleviate some stress and help you take the appropriate steps toward consolidating and eliminating your existing debt. Whether you are behind your house payments or simply dealing with credit card debt, makes all the difference as far as repossession and garnishment are concerned.

Is Garnishment a Possibility for Unsecured Debt?
To ease your fears a bit, your wages will not be garnished if you are behind a few payments on unsecured debt as long as the court does not have a judgment against you. Unsecured debt is not tied to any collateral. In comparison, a secured loan is one that is connected to property or collateral. A house loan or car loan is considered a secure loan. In this case, your bank or creditor is legally allowed to come and repossess your car or foreclose on your home if you stop paying making your house or car payment. Additionally, if you owe taxes, the government can garnish a portion of your wages.


What Is Considered Unsecured Debt?
An unsecured debt is any form of debt that is not tied to specific property as collateral. Because there is no security guaranteeing repayment of this type of debt, a creditor cannot garnish your wages without a court judgment. Many types of debt fall within this category. The most common types of unsecured debt include:

  • Store loyalty credit cards
  • Mainstream credit cards
  • Student loans
  • Telephone and utility bills
  • Medical bills
  • Personal loans executed without a security agreement or mortgage
  • Back rent

According to this list, most debts are unsecured and are backed only by your promise to repay the forwarded amount of credit provided.

In What Case May Wage Garnishment Occur?
Because unsecured debts are not guaranteed by specific collateral, a creditor is not allowed to automatically garnish your wages. If your debt becomes delinquent, the creditor is allowed to contact you to ascertain payment, report the delinquent debt to a credit reporting agency, or file a lawsuit against you. If the creditor files a complaint at the state or federal level, you will be served with a copy of the complaint. After you have been served, you have the right to contest the lawsuit before a judgment is reached. If the complaint is heard and a court judgment is reached, the creditor may be entitled to garnished wages.

Can Garnishment Be Stopped?
In the event that the court has made a judgment against you and your wages have been garnished, you have a few different options. In most cases, the best option for stopping garnishment is filing bankruptcy. If bankruptcy is the route you choose, it is important to use a trusted agency to help you sort through the process and dealings. If you need more information or require assistance remedying your debt situation and avoiding wage garnishment, contact debt settlement professional at Rescue One Financial today for help.


Who Regulates Debt Management Companies?

The Uniform Debt-Management Services Act (UDMSA) of 2005 provides the rules to debt counseling and management governance by oversight agencies. In spite of the recent enactment of debt management regulation, the consumer debt counseling and management services industry dates to the 1950s. Debt management services provide counseling to debtors in the interest of paying off owed finance to crediting parties.

The general objective of the Act is to provide services with a guiding set of rules toward governance of debt management services programs so as to assist consumers in avoiding bankruptcy. Related debt management services focused on consolidation of debt under an umbrella loan program, are part of the scope of regulatory oversight dedicated to governing rules to creditor settlement of debt.


Consolidation services offering debtors’ payment arrangements in exchange for collection of a periodic amount from a debtor for which the creditor has assented to meet the rules to debt satisfaction.

The UDMSA framework guides registration of services, service-debtor agreements, as well as enforcement.

The registration of consumer debt-management services is mandatory. Registration includes reporting of: financial condition, principals, service locations, agreement with debtors, and history of operations. Liability insurance of the amount of no less than $250,000 and a bond of at least $50,000 must be evidenced for registration. Annual renewal of registration is required.

Disclosure rules to agreements with debtors, and debt certification of debt consultants. Statutory provision to the contents of agreements and related fees include a penalty-free, 3 day right of rescission on the part of a debtor. There is also a 30 day cancellation fee.

Termination of debt servicing after 60 days of non-payment to a creditor is standard. Payments to creditors by debtors must be held in a trust account. The UDMSA provides for creditors to charge an overall fee cap based on amount entrusted by a consumer or 30% of the difference between the principal owed at time of service initiation, and debt settlement amount.

Prohibition of specific activities by debt management services is outlined in the Act. Creditors may not misappropriate trust funds; request a settlement or more than 50% of the total debt owed without debtor consent; demand gifts or premiums to enter into agreement; or represent debtor settlement without proof of creditor status as a certified entity.

Under the Act, creditors must show good faith in all obligations to debtors. Errors and omissions insurance coverage exhibits that a service is protected from third party litigation, and that such liabilities will not affect a consumer in their relationship with the creditor, or the ability of the service to adequately and honestly managed entrusted finance.

UDMSA & Debt Settlement Trade Associations
The recent rise of debt settlement in service to consumer debt relief as an alternative to bankruptcy, established the conditions for UDMSA enforcement within debt settlement trade association practices. The adoption of the UDMSA and related rules to practice illustrates the commitment that consumer debt management organizations have in protecting consumers and creditors from bankruptcy.

To learn more about Rescue One Financial and our background visit our Wikipedia page.

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Can Long Term Debt be Negative?

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Plenty of people carry a lot of debt for the long-term. While it’s possible for a gainfully employed person to carry lots of debt, it’s not always wise. In fact, people often ask themselves the question, can long-term debt be negative? The answer is yes. Here are five reasons why long-term debt is a bad thing.

  • One job loss away from a catastrophe:
  • All-too-often, a gainfully employed person with a six figure income will buy a large house, boat and car. Not only that, people will often carry thousands of dollars of credit card debt. While this is okay if you make a lot of money, what happens if you lose your job? In fact, looking to 2008, we can see what happened when well-paid individuals lost their jobs; they ended up with serious financial problems. So, in the end, whether you make a lot of money or not, long-term debt is bad as you can easily lose your job or business income.

  • Hurts retirement savings:
  • If you carry loads of debt, you swill struggle to save for retirement. While it’s easy to forget about this event if it is 20 years away or longer, it’s not wise. No, if you if you forget about retirement or don’t put any money in the bank or into retirement accounts, you are going to set yourself up for a sad future. On the other hand, if you don’t carry too much debt, you can put money in an IRA or 401k.


  • Can’t make changes in life:
  • As mentioned, people often have excellent incomes but nowhere turn. If you are like most people, you will want to change jobs or maybe start a business. However, if you become addicted to a certain lifestyle and have loads of debt, you will struggle to make any moves. Not only that, if you ever want to return to school, you are going to hurt your financial future if you already owe the credit card companies lots of money.

  • Kids:
  • If you have a dual income and no kids, you probably think life is perfect. In a way, people with this income and no kids are probably enjoying their life. However, if you plan to start a family in the future, you are in for a rude awakening if you look at the costs associated with raising kids and sending them to college. However, if you are in debt, you are in for even more pain. Think about it, for every kid you have, you are going to have to spend plenty of cash, and you won’t have any money to knock out your debt.

  • Stressful:
  • As you probably know, if you are in debt, you can suffer from a lot of stress. In the long run, this will cause you serious problems with your personal and work life. For this reason, you should try to minimize your debts.

If you need help paying off your debts or coming up with a plan, you should consult the qualified debt management professional at Rescue 1 Financial to help you formulate a serious and workable plan.


What are Debt Management Ratios?

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Debt management ratios are used to manage a company’s ability to continue to operate without encountering financial challenges in the future. These ratios are sometimes referred to as a long-term solvency ratio. Lenders, investors and business owners rely on this ratio as a decision-making tool and use it to measure the overall health of their business.

How are debt management ratios used?
Debt management ratios are used to determine whether or not a person is capable of handling long term debt in addition to regular obligations. The measurement of a company’s total debt amount in proportion to what is financed is considered the debt management ratio. These metrics can be used in gauging the overall health when operations, savings, funds and stocks are all taken into account. This ratio is very important in determining the level of risk associated in dealing with a business. This proportion also weighs the potential of default. The ratio measures the proportion of a firm’s assets funded by equity or debt.


What happens if the debt management ratio is unfavorable?
If the debt management ratio is unfavorable, the business is at risk of default, bankruptcy or some other form of financial distress. Industries that are unpredictable when it comes to sales and cash flow do not have the same latitude as their more stable counterparts. These differences determine how a business is able to handle its debt. Companies classified as being capital-intensive require more capital like plants to operate; low capital industries do not. This is why companies that are capital-intensive tend to have higher debt management ratios compared to companies that have low-capital. A company with a higher ratio can expect to pay more in interest rates in the debt management ratio isn’t low enough.

Why are they used?
This ratio is used by lenders and investors to measure the health of a business. High debt-to-equity signals that a company may be headed in the wrong direction or may be approaching financial distress. The revenue generated isn’t substantial enough to meet all obligations. These ratios may also demonstrate the company’s inability to really increase their profits and properly leverage them to the firm’s advantage. Investors like to know beforehand whether or not it makes sense to invest in a particular business.

How do lenders treat those with better debt management ratios?
Companies with better debt management ratios are much more likely to secure funding from lenders and investors. Those with the best debt management ratios are in a better position to acquire capital if more is needed. Other businesses may have a more difficult time getting additional capital if they get in a bind.

Debt management ratios can be a valuable tool in assessing the health of your business and gauging its long term solvency. It can also helpful you strategize on how to better leverage your finances should you discover a need for loans and investors in the future.

If you have questions or concerns related to debt management ratios or services contact the professionals at Rescue One Financial, we are here to help!