by Tricia
Oh how I love to read stories about those who have made their goal of paying off their debt a reality. A reader sent me a link to this story about a teacher that is only a few days away from paying off all of his credit card debt and loans.
Credit Counseling Group and Repayment Plan Helped Teacher
Jerry Guerrero, 56, ended up working with a credit counseling group to help pay off his debt. I don’t talk about that option much because I don’t know much about it. For Jerry, it seemed to be the tool that he needed to become focused and pay off his debt.
A few key points of his plan:
- Quit obtaining new debt
- Get interest rates lowered (his highest was at 24%)
- Make extra money
- Avoid late fees
Congrats Jerry on your awesome achievement!
If you avoid credit cards in the first place, You no longer have to remember those key points !
Except then you miss out on all the rewards. For example, I have a no fee 1% cash back Visa card which I only use where the seller charges the same price whether I pay cash or credit card. I pay cash if they offer a discount. Over the last year I “earned” $275.00. This was all spending I would have done anyways, like groceries, gas, any bills that will charge the credit card, etc. and I pay the bill in full every week (I get free grocery points and pay no banking fees for every bill payment I make so I make a few extra).
If debt and spending is a compulsive problem that someone can’t easily control, then sure, it’s best not to have the temptation, but if it’s just a case that people ran up debt in the past, have realized they don’t want to do that again, and use credit cards safely, it can be more lucrative than not using them.
Of course, the other positive for using cards responsibly is establishing a credit history before you go for your first car loan/mortgage. But anyone being told to do this also needs to read stories like these so they realize what the pitfalls are.
And no, I’m really not trying to be an advocate of credit cards, in fact, I’d prefer the government to step in and make a law saying credit card companies were not allowed to require equal pricing so it could go back to how it was in the 70’s… where people would charge you full price if you used credit cards, or knock 2-3% off for cash. If they did that, I’d lose every card I had in a heartbeat 🙂
great outcome to a sad situation — seems like he’d not be in such a mess if he hadn’t been married 4 times.
Tricia,
BTW, you are now only $999 from having your debt half paid off!
What an inspiring story!!!!!!
Tricia, as you know I had considered a DMP through a credit counseling agency but I have found that with the exception of American Express, all of my creditors have been reasonable in working with me on a long-term repayment plan with low interest rates. Citibank was the best, giving me a 0% rate, much better than the 9.9% the credit counseling agency was going to try and obtain. A DMP should be a last step before talking directly with your creditors. Although they may not be as flexible in individual cases, the worst they could do is say no; best case you get a 0% rate like I did, alebit with the account having to be closed. Very inpsiring story though, given his level of debt is on par with mine. I will do it TOO!
I have found credit cards or one credit card at least is pretty much essential for living today for the emergency bills etc but its much better to have a zero percent and roll the balance. The problem arises when you slip into paying for things on that card.
Keep it just for emergencies and you should be fine.
Its sad to say but credit cards are a necessity. For instance you can’t rent a car without one. I used to rent cars with my check card until the bank started printing “CHECK CARD” on them. One of my personal rules for credit cards is never charge more than you can afford to pay back in a month.
I like hearing stories like this, too. I’d submit mine to you, but the debt was only $1000, and took two weeks to pay off. Not so inspiring.
Is there a list of credit counseling agencies that can be trusted and are good to call just like Mr. Guerrero did?
Credit counseling seems like a good service if you can’t figure out how to do it on your own. Most of the get out of debt plans are very consistent in that not adding to the debt, paying more than the minimums while avoiding fees, and rolling the payments over as each account is paid off. High interest rates can be difficult to deal with, but when it comes to making payments, the bigger the payment, the faster it will get paid off. I have been tempted by those 0% teaser offers to transfer a balance is even worth it. The advantage is to treat it like a term loan instead of a revolving credit line. I still use my debit card though for day to day transactions. Cash makes me nervous for some reason.
Amethyst, google consumer credit counseling or CCCS. choose one that is enrolled with the Better Business Bureau and look up the CCCS company on BBB website. creditors also may have recommendations as to which CCCS they work with.
Jim, creditors seem to swing on a pendulum in what they will work out with an individual. a few years ago, most were very adamant about going through a CCC rather than negotiating with you. you can also only negotiate if you are in a good position. many people aren’t.
the positive to going through CCC is lowered interests rates even to zero. there are caveats though.
1. some creditors, AMEX being the biggest one, will go to zero through CCC, but they will list the account as a charge off, which will stay on for 7 years. AMEX also maintains interest accrual on your account which will be noted on your bank statements every month at a maxed out rate. if the CCC skips or is late on a payment, AMEX will cancel the program through CCC and you are still responsible for the amount with interest. the calculated amount isn’t the amount that was being paid off on principle, the calculated amount is normal calculation for an interest account. Your payments are supposed to go towards principle only, but your monthly statement won’t show you what the payoff balance is. You must call AMEX to find it out. This is important when you are close to paying the AMEX account off that is enrolled with CCC. most creditors who go to zero will not list the account as a charge off, which means that if you pay as agreed that is what it will show up on your credit report “paid as agreed”, which is positive.
2. you cannot open credit while enrolled in CCC, b/c your credit report will show you are enrolled in CCC. this goes off once you end CCC, which you can do at any time even if you haven’t paid everything off.
3. CCC is a middle man and you do pay a fee that is included in your monthly payment to CCC. if payments are late, you are still responsible and it will still show up on your credit report as being a late payment, even though it was CCC’s fault. the best way to mitigate this, is to have have your credit accounts redated to allow for time when CCC gets your payments to when CCC pays your payments. CCC normally pays a week after they receive your payment.
4. although risky when paying off debt, you should keep one of the credit cards open. presumably the longest one held that is in good standing and pay it outside of CCC. This will allow you to retain credit history. this may not be a viable option for some people though. you do not have to enroll all your debt in CCC when you sign up. those accounts enrolled will be closed.
5. CCCs promote much about how they help. They really don’t. they have set agreements with creditors. The whole proposal thing is really a sham and a waste of time, but that is what they do. moreover, the CCC isn’t a proponent for you. if any problems arise, you are on your own to resolve them (i.e. missed or late payments even though you sent the check into CCC). you still must actively monitor and ensure that CCC pays the creditors.
6. ensure that your creditors don’t suddenly change their addresses. Wells Fargo Financial Services did this a couple of times. As I said, you are still responsible and liable for the debt and any late or missed payments.
7. CCC makes a big deal about paying the final bill through them, saying that somehow it looks good on your credit report. that’s hog wash. it doesn’t show up on your credit report. the best thing to do is to pay the last payment to the creditor yourself to ensure that it is paid, and you can send in a letter with the payment requesting account closure verification. although CCC are supposedly “nonprofit” companies, they have in the past recent years seemed to be trying to make a profit. the fee shares going to CCCs have increased. You and the creditor both pay CCC to handle your repayment, even though they don’t do anything more than receive your payment and disburse the money to your creditors.
I am really struggling with some debt right now, still one month behind on my mortgage. Feels like I will never get caught up, the more I make, the deeper I get. It is awful.
come visit me to read my saga at
please feel free to comment while you’re there.
Tim – I just wanted to say thank you for that information. You’ve really shed some light on those companies and I really appreciate the time you took with writing it all down 🙂