Settling Credit Cards Vs. Paying Off Closed Accounts
Millions of people get into trouble with mounting credit card debt every year. With unemployment rising, many people find it hard to pay monthly balances. The credit card company may contact you after becoming severely delinquent on your account offering a settlement offer. If you have not paid your balance and the credit card company charges off your account, it may sell the debt to a third party collection company to try to recover its losses.
Other People Are Reading
-
Settling Credit Card Debt
-
Debt settlement companies offer to negotiable with credit card companies to reduce the amount you have to pay to settle your debt. Some claim to be able to reduce the balance by as much as 30 percent to 70 percent. However, the credit card company is not obligated to accept the debt settlement offer. Also, if you stop paying you bills, late fees and interest charges will continue to accumulate. The debt settlement company will charge a fee for its services and set up an account for you to deposit money into to pay your creditors. One consideration to keep in mind: the money you save on your debt by settling it may still be taxable by the IRS.
Paying Off Closed Accounts
-
If you have an account with a credit card company that has been closed or "charged off" you may still want to pay the debt. Credit inquiries to your credit report will show that the debt has been paid. This may be favorable to you in trying to re-establish your credit and obtain a new loan.
-
Misconceptions
-
Just because a credit card company closes your account does not mean you do not have to pay the existing balance. What the company is canceling is not your debt, it is the ability to make new charges to the account. Additionally, paying off a delinquent credit card account does not mean that the information will be removed from you credit report. A delinquent account will remain on your credit report up to seven years, even if the balance has been paid off.
Available Options
-
If you are struggling to find a solution to credit card debt, you may benefit from the services of a debt counseling expert. A number of reputable free debt counseling services are available, including non-profit organizations such as Debt Management Credit Counseling Corp. Qualified financial counselors can work with you to help you develop a budget and decide upon a plan of action to get out of debt such as debt settlement, debt consolidation, or, as a last resort, personal bankruptcy.
-
References
Resources
- Photo Credit Jupiterimages/Pixland/Getty Images
