As a credit card debt woman who has been in a free debt management program since 2008, I am always asked why I opted to sign up a debt management program and didn’t do it myself.
First off, the debt management program I enrolled in my country is FREE; there is neither enrollment fee nor monthly service charge.
As far as I am concerned, there is only ONE credit counseling and debt management agency in my country. It’s different from the US where there are lots of non-profit and for-profit credit counseling agencies.
Since it’s free debt management plan that involves zero service fee, why not?
Next, contacting banks and negotiating a partial settlement or a reduction in the bills is more difficult than you think.
I DID try to call up and write in asking for lower interest rates. Out of six banks, only one bank agreed to reduce the interest rate to 9%. A few banks were between 12% and 15% while the rest declined to lower the 18% per annum interest charge.
When I found out that my credit counselor was able to negotiate with banks to reduce my interest rate from 18% to 6% and 7% for some banks, and most important of all, to waive late payment fess and over limit charges, it didn’t take me long to make up my mind.
I signed up the free debt management program after the certified credit counselor explained in details what a debt management plan was and reminded me a few times that all my card accounts would be included in the program and closed.
Take note: All Your Credit Card Accounts Will Be Closed Once You Are In A Debt Management Plan (DMP). Shutting down all your accounts means that it’s likely to damage your credit score.
Since my maxing out most of my credit cards had already harmed my credit utilization ratio, a key component of credit scores, it’s okay to shut down all card accounts.
If you are in the US, make sure you sign up with a credit counseling agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.
An accredited credit counseling and debt management agency typically charges $30 one-time setup fee, and $15 per month while you’re on the debt management plan.
If you don’t want to deal with your creditors directly and you need help with all of your credit cards, opt to go through a debt management program.