Get help from debt management plans (DMP).
Major credit card issuers are making it easier and cheaper for consumers to get assistance from a debt management plan, or DMP. The National Foundation for Credit Counseling issued a "Call to Action," which included the organizations asking creditors and banks to lower the cost of consumer participation in debt management plans, or DMPs. Several different lenders and companies responded and are offering additional support to their customers, including improved access to debt management plans. These are programs administered by credit counseling agencies to help people who are drowning in credit card debt come up with long-term, realistic repayment plans with their creditors.
A total of 10 credit card companies have shown support for the "Call to Action", and are offering additional options to provide credit card debt help. The companies include American Express, Bank of America, Chase Card Services, Capital One, Citibank, Discover Financial Services, HSBC Card Services, GE Money, U.S. Bank and last, but not least, Wells Fargo Card Services.
These companies have provided a plan that creates a so called second tier of debt management plans for consumers who are in particular distress, allowing these people a lower repayment rate. The new programs will go a long way towards helping certain individuals get out of credit card debt.
The National Foundation for Credit Counseling said that for over 40 years, millions of consumers have benefited from repayment programs and avoided bankruptcy by using debt management plans (DMPs). Numerous lenders and creditors provided help in the form of some repayment concessions, including waiving over-the-limit fees, late fee, and also providing a reduction in interest rates. However, during the tough economic times that the country is facing, more people have lost their jobs and fewer consumers have sufficient income to be eligible for, or the ability to maintain, a traditional DMP. Sadly, this often leaves bankruptcy as the only option for many, and they are trying to prevent that.
The cooperation of these various credit card issuers, such as Chase, will make the repayment of the credit card debt more affordable and more relative to today's economic reality of what millions are families are faced with said the NFCC.
Another resource that is fully supported by the National Foundation for Credit Counseling and many credit card companies are hardship plans. These have some of the same traits as a DMP. Look into any credit card hardship programs that your credit card company may offer. More on credit card hardship programs.
Credit card issuers Debt Management Plans
As a result of the new debt management plans being put forth by companies such as Bank of America, Capital One, Citibank, and others, so called hardship cardholders, which include those who are dealing with a recent job loss or are facing other especially challenging circumstances or emergencies, would owe a minimum 1.75 percent on their repayment rate. Some other consumers would be offered a monthly minimum repayment rate of 2 percent of their unpaid credit card balance.
Compare that to under today’s current Debt Management Plans in which that repayment rate can reach as high as 3 percent. To put this into dollar terms, what this means is that a hardship consumer with say $25,000 in credit card debt would face a minimum payment of just $425 instead of what they can currently expect of as much as $750. So the monthly savings are significant.
Find more details on the Chase Debt Management Plan as well as the plan offered by Wells Fargo. Some other credit card companies that provide assistance include Discover Card, Bank of America, and Citibank.
There are also independent organizations, non-profits groups, charities, and others that offer debt management plans. They can contact your lender directly on your behalf to try to get you relief. Or they can offer you advice and other aid, such as access to budgeting skills and workshops. An example of one of these organizations is Consumer Credit Counseling Services, which are part of the National Foundation for Credit Counseling (NFCC), Inc.
There have been other attempts to improve DMPs. During the summer of 2008, consumer advocates and banking industry representatives put together a proposal that would have enabled creditors to eliminate up to 40 percent of the principal that was owed on credit card loans and that would also have allowed them to stretch repayment plans to over five years. However, this plan never gained traction. You still may be able to negotiate down principal though. Find tips to negotiate credit card debt.
These new, competitive tiered DMPs offer benefits to both lenders, such as Discover Card and HSBC, and also help consumers. So it benefits both banks and their customers. The new debt management assistance programs will enable hundreds of thousands of borrowers to join a DMP who otherwise would not be able to join, thus adding $700 million of unsecured debt to new DMPs each year. This shows the potential growth of these plans.
The new DMP plan will help borrowers erase their debt, and it will also encourage them to set aside funds and savings for a financial safety net for any future emergencies. How can this occur? In the past, debt management plans made consumers pay every spare dollar to paying off debt. These new plans, with lower obligations and repayment rates, will allowing people to build some emergency savings and funds that will prevent them from falling back into debt easily in the future.