For some consumers struggling with credit card debt, consolidation may be an alternative that can save them time, money and the potential risk of bankruptcy. Some debt consolidation companies offer free credit card consolidation, but such an attractive offer should be approached with scrutiny. After reviewing the fine print, free credit card consolidation may not be exactly what it appears to be.
Credit card debt consolidation companies usually work with a law firm to come up with payment arrangements for consumers struggling with their credit card debt. The consolidation companies (and their associated law firm) deal directly with the credit card companies on behalf of the consumer, who becomes their client. The consolidation companies can come up with an payment plan at a lower interest rate for the consumer, but the credit cards can no longer be used once the agreement is made.
Some debt consolidation companies offer free credit card consolidation as part of their services package. When they offer free credit card consolidation, they mean they will be willing to take on all of the debt and arrangement for payments without an initial fee to the credit card holder. That does not mean, however, that the entire process will be free for the new clients.
The credit card consolidation company will be looking for the consumer to make monthly payments of a pre-determined amount, and will be charging a certain amount extra for a processing fee. While the payments arranged by the debt consolidation company will be lower and at a substantially decreased interest rate, there is no minimum payment that can be made. The monthly payment made by the consumer to the company is constant over a fixed period of time.
While debt consolidation companies may offer free credit card consolidation, they can easily arrange for other fees through the process that will more than make up for such a “special” offer. Along with the monthly processing fee, many companies require a first month or last month payment for their services that does not go to the credit card companies, but they keep themselves. While the “consolidation” is “free”, the cost of dealing with the credit cards and arranging for the new repayment agreements is not.