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.
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.