When you have overspent on your credit card and have finally reached a point where you know that you can no longer pay it off, then it is the time to opt for card credit debt reduction. One would qualify for this program if they are unable to make debt payments on their credit cards and are close to filing bankruptcy.


This kind of program is also know as the debt management program (or DMP) wherein a settlement is made between you and the bank you owe so that 20 percent to 60 percent of your debt is settled without you paying any more interest. This kind of process is usually handled by third parties who negotiate for you, with your creditors, and try to get the best deal possible so that you can pay off your debt while having savings at the same time.

DMP is usually possible for debts that are unsecured debts. The timeframe which this covers may be between 6 months to 3 years, depending on how much you owe on your credit card. So don’t believe some agencies that may promise you between a 50 percent to 70 percent debt settlement and be mindful of who you deal with. Always read the fine print, and talk to your bank about it if you are really in doubt.

The advantages of availing of card credit debt reduction are:
• You will be able to save money because you pay less of the interest and focus on your existing balance once you are part of the program;
• You can be part of a program that will save you from filing for bankruptcy and completely ruining your credit history and credibility as a borrower; and
• You can pay off a debt that has been bothering you for a long time and finally gain that peace of mind you are searching for.

However, debt reduction of your credit card debt also has its disadvantages. The main one is that by undergoing a debt management plan, even if you did not file for bankruptcy, the fact that you could not pay off you bills will reflect on your credit history and credit score. This would mean that in the future, after undergoing the DMP, you will find that it will be harder getting loan approvals. Or if loans approved, the interest will be very high. The biggest lesson you will learn after undergoing DMP will probably be to act with restraint in using your credit card and make payments of debts properly and promptly.