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Debt Relief Options

During these rough economic times, there are millions of Americans struggling with credit card debt.  If you are one of those struggling, you should know there are a number of options for you to consider.  Each of the options have their own set of benefits, risks, and downsides to consider.  Once you fully understand each of the options, you will be better able to make an educated decision as to which option is best for you.

Here are 5 options for people struggling with too much credit card debt.

Your Options

Debt Relief Option #1: Minimum Payments

Many consumers have fallen into the "trap" set by Credit Card Companies of only paying their minimum payments each month. These types of clients are, by far, the most profitable for creditors, because by paying only the minimum payment each month, consumers essentially find themselves in a life-time payment plan.

Benefits of Making Minimum Payments

If you are able to make your minimum payment (on time) each and every month, then you are less likely to be hit with unexpected late charges, raises in annual APR, or stressful calls from collectors. Your timely payments also will show positively on your credit.

Risks of Making Just Minimum Payments on Credit Card Debt

If you have the means to pay more than your minimums each month, you certainly should do so (see down sides). Consumers that find themselves in the position of only being able to pay their minimum payments each month are often times flirting with disaster. The reason is, if a payment is late, even a day late, credit card companies usually will hit you with late fees, and even worse, raising annual APR's. Once that happens, the minimum payments normally go up, sometimes significantly, and it puts you at risk of then being in a position where you can't afford your payments

The other risk of making just your minimum payment each month is it can give a false sense of financial well being. Many people believe as long as they are able to make those minimum payments, they are financially sound enough to continue to make purchases on their credit cards, increasing their debt load. This can become a vicious cycle, which is often times repeated again and again until you find yourself "maxed out" on both credit, and your ability to make payments. Once that happens, you would be forced to consider one of the other Debt Relief Options.

Having balances on credit cards that exceeds 50% of total credit credit limit will have a negative effect on your credit, even if you continue to pay your minimum payments each month.

Downsides of making Just Minimum Payments

The primary downside to making just minimum payments each month is simple. Cost. If you have $20,000 in credit card debt with an APR of 19%, and are making just minimum payments, it will take you over 53 years to pay off the debt, and total cost of $74,464. (Source: CNN Money. Minimum payment based on 2.1% of outstanding balance)