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What to be aware of when settling credit card debt

It is not unusual for Tennessee residents to carry credit card debt. Credit cards can be used to purchase consumer goods, but they are often used by people to pay for necessary expenses, repairs, medical bills and other essentials in times of need. When people rely on credit cards to pay for necessary expenses, they can find it difficult to pay the company back. They may get stuck in a situation where interest is accruing faster than they can pay the full balance owed.

In these cases, people may consider credit card debt settlement. Credit card settlement companies became popular during the recent recession as a way for consumers to negotiate directly with their credit card companies. These companies charge consumers a fee to negotiate directly with credit card companies to lower the amount of money that people owe.

These companies then advise people to place some money in an escrow-like account to be used to pay the settlement amount that is negotiated. They may also tell people to stop making any payments to credit card companies.

According to the Federal Trade Commission, consumers need to be careful about participating in debt settlement plans with companies. There are fraudulent companies that may not actually provide the service that people are paying for. People should be aware of the type of work the company is agreeing to and their fees before giving them money.

The FTC reminds consumers that a legitimate settlement company must allow you to remove any money placed in escrow, with interest, at any time. Further, the company should advise you of the risk of damage to your credit report by stopping payments. Finally, they can only charge you a portion of the fee every time a debt is settled; the full fee can only be charged if all debts are settled.

Source: Federal Trade Commission, "Settling Credit Card Debt," Accessed on Oct. 13, 2014

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
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