** Credit Card Debt Relief Tip of The Day **

Can A “Do It Yourself” Plan Help To

Control Credit Card Debt?

By Donna Nell
Guest Author

After the colossal financial collapse in the US, people are submerged in the sea of debt. These debt stricken consumers are struggling hard to come out of this catastrophic financial situation. In such a situation, they rely on credit card debt settlement to eliminate their financial woes. You can easily manage and settle your credit card debt on your own if you follow some simple steps.

Here are a few steps that can guide you to settle your debts directly with the creditors:

1. Contact your credit card companies and negotiate with the creditors to reduce the interest rate. When the interest rate on the principal balance is reduced then a large amount goes toward paying down the balance.

2. Prepare a list of your credit cards include the name of the card, interest rate, your current outstanding balance along with the minimum balance and due date. Prepare a list of your credit card debts in descending order of the interest rate then it will be easier to pay back.

3. Try to calculate your minimum payment to estimate the amount required to pay off the debt. You can include additional money that you can use to put forward towards paying off the credit card debt each month.

4. You should try to save money for a settlement offer, then it will be easier for you to settle your debt like a professional. You can negotiate your debt with the creditors to reduce the principal balance by 40% to 50% of the owed amount. The creditor has to give his consent before you start repaying as per the settlement amount.

5. But remember that the settled accounts are considered as charged off accounts by the credit bureau. The Internal Revenue Service treats the forgiven debt as taxable income. Try to convince the creditors to report the account as “paid in full” instead of “settled in full”. Otherwise your creditor will consider you as a high risk borrower and you might face problems getting loans in the future.

** Credit Card Debt Relief Tip of The Day **

CNN Money Says DON’T CANCEL Credit Cards

There has been an ongoing  debate over whether or not to cancel credit card accounts as a way to help with credit card debt relief. The old school of thought was that canceling unused cards would help quell the fears of lenders that you might put yourself more heavily into debt if you have unused credit. Also that canceling the cards would take away your temptations to spend.

But CNNMoney.com put out a report on August 24, 2009 that says your credit ratings will SUFFER if you start canceling credit card accounts, especially if they are older accounts. Why? Because older accounts show more readily that you have a track record with credit (hopefully a decent one). Your credit score will actually go UP if you have old credit card accounts (with a zero balance).

Debt to Credit Ratio Extremely Important

It also has to do with the ratio you owe compared to the amount of credit you have. If you have a lot of credit card debt and decide to start canceling credit cards that are already paid off, then your debt to credit ratio is going to rise. The best ratio is 10% or less in the eyes of your creditors and how your credit score is kept.

For instance, if you have $5000 of credit card debt, but your available credit total of all your cards is $50,000, then you have an acceptable debt to credit ratio of 10%. But if you delete credit card accounts, and your available credit total becomes only $20,000, now you have a debt:credit ratio of 25%. That’s a big red flag these days to both lenders and to your credit score.

Actually Open NEW Credit Card Accounts?

So, what’s the best thing to do to help with your credit card debt relief and credit score, according to CNN Money? Pay off your credit cards, but DON”T delete credit card accounts (especially older ones). They actually say that OPENING NEW accounts, while it will negatively affect your credit score in the short run, is actually advantageous to your credit score in the long run (but this is only a good strategy, they say, as long as you don’t need a loan in the very near future).

To see CNN Money’s post on the cancel credit card issue, click the link.

Disclaimer - Remember that the information on this website/blog is by no means official information. While we attempt to be as accurate as possible, the content is largely opinion and entertainment based and should not be confused with official legal or financial advice. If you need help with credit card debt relief, you should seek the advice of a reputable and professional debt counselor. Further, a commission may be paid to the owner of credit-card-debt-relief.org for clicking into other sites through pay per click ads or by purchasing products or services of affiliated websites. (Please Read our Terms page for further info.)