2

I have been getting offers to call and seek assistance to settle with credit cards. I have so far not considered these but have I missed a trick?

Should anyone ever consider these under any circumstances or are these snake oil?

For additional context that applies to me (perhaps not for everyone in my situation) is that I currently have most balances on 0% APR cards and can pay off the debt before the promotion period expires. That said, the wordings from the 3rd party companies (not the credit card companies) makes it sound like I shouldn't even be paying so much. So I was wondering if I am being a donkey by paying my debt instead of attempting to bargain and settle.

Please note, my specific case maybe one thing but a majority of the question should still be treated as is it worth considering to take up settling.

perennial_noob
  • 1,946
  • 3
  • 15
  • 35

3 Answers3

6

There is a very common scam, "Rachel from Card Member Services" a robo call that seems impossible to stop.

To mhoran's point, if the card issuer is calling you to settle, that's a different story.

My SIL got into trouble some time ago. Unable to refinance a mortgage down to 4%, from 7%, due to an outstanding, very overdue card. She was in discussion and was looking at paying $456/mo for 4 years to pay off the $14K debt. And was planning this in her budget. I told her to offer the bank $10K, lump sum. They accepted. But again, only talk directly to the card issuer.

JoeTaxpayer
  • 172,694
  • 34
  • 299
  • 561
4

That's quite an edit you made to your question! You are basically asking:

I borrowed money. I can afford to pay it all back, but should I?

Why wouldn't you pay it all back? The concept of debt settlement, as well as other types of loan forgiveness, all revolve around a basic assumption that at the time of purchase, you had both the means and intention to pay off the entire loan in the future. But despite your best intentions, at some time later your circumstances changed such that you could no longer afford the payments. Settlements are not intended to be used by people that don't need to settle. If you can pay, you absolutely should. It's simply unethical otherwise.

That being said, there are some unethical people that could afford to pay off the debt but choose not to so they can save some money. The system is designed to prevent those people from doing it again (at least in the near future) by reducing their credit score. So, you can try to settle if you really want to, but it'll hurt your credit for up to 7 years.

Regarding the legitimacy of debt settlement companies, they basically work by charging you to negotiate on your behalf. For example, if you owe $10K, the company may negotiate $5K with your bank and charge you $6500 to pay off the debt. The reason these companies are considered scams is that they oftentimes try to convince people to settle on debts that they don't need to settle. Also, note you can't usually negotiate a settlement with a bank until after you stop making payments for at least 3 months. The reason for this is the bank wants to see you take a hit to your credit score first so they know you're serious about actually needing to settle.

Conclusion: don't ever settle your debts if you don't have to.

TTT
  • 47,380
  • 7
  • 101
  • 152
-4

Only talk directly to the credit card company. Third Parties usually are a bad idea at best and a scam at worst. If you call the Clark Howard hotline I am sure they will concur with what I am saying.

Be ready for your credit to take a hit if you do pay a percentage on the dollar.

Mark Monforti
  • 1,782
  • 10
  • 15