With more than 175 million credit card holders in the United States, the potential to get into debt is greater than ever. According to the American Credit Association, 46 percent of Americans with a credit card carry part of their debt over to the next month. Nearly 34 million Americans admit they’ve made late credit card payments. It is easy to see how a cardholder can get into trouble with credit. It can be even more difficult to find a way out of overwhelming debt. Many Americans are seeking online solutions to resolve their debt issues.
Like any Internet-based service, there are unscrupulous companies willing to charge you for services you either don’t need or that don’t produce any real results. Most online credit counseling services, however, really do offer constructive advice.
Before trying any online credit counseling service, do a little homework to confirm that others have had beneficial results. An easy way to do this is to check online forums or read the comments section on a company’s website. If you’re still in doubt, check with the U.S. Justice Department. The agency maintains a list of approved credit counselors offering online programs.
According to the National Foundation for Credit Counseling, more than 3 million people used online credit counseling programs in 2010. That figure is expected to increase, especially as Americans over extend themselves in a tough economic climate.
How to Choose an Online Credit Counseling Service
No matter how credit counseling is delivered, you should still receive the same level of service. Some online credit counseling services have an actual person on-hand for you to speak to as you type; others are even more interactive.
You want a service that is going to offer practical, realistic solutions, including:
• How to develop a realistic budget
• How to deal with creditors
• How to improve your credit rating
• How to get a free copy of your credit report from each of the major credit reporting agencies
• How to correct inaccuracies on your credit report
Some online credit counseling services provide financial products accessible online or available for download directly to your computer. Additional services may include consolidation loans, balance transfer credit cards and special programs designed to rebuild your credit.
If you opt for a balance transfer card, which is just a new credit card that transfers the debt from your other cards onto one card, make sure you confirm the interest rate. Only opt for a consolidation loan if you can make the payments. A credit counseling service, online or otherwise, is not designed to magically erase your debt.
What You Need to Get Started
Even though you are not sitting in front of someone as you talk, you still have to gather certain information. The information you provide online is the same as you would present in person. The only difference is how the information is delivered and processed.
For any forms that need signing, most services accept an electronic signature as a legal version of your signature for any agreements or other documents related to various services or debt consolidation efforts. Since you will be entering the information yourself online, it is important to be honest.
Some of the common items you will need include:
• Recent credit card statements
• Interest rates on current credit cards
• Information on other debt sources such as student loans or car loans
• Past due notices and other correspondence from creditors
As with any credit counseling service, your delinquency is still reflected on your credit report until you no longer have late payments. The experience with an online credit counseling service is about the same as you would have with an in-person meeting.
Online technology makes credit counseling via the Internet more interactive.
Some services allow you to participate in a web conference, in a group session with other students and instructors or even participate in a live class with real-time interaction with the instructor and other students.
You often get virtual access to a credit counselor specifically assigned to you. This way you are dealing with the same person each time.
Additional features may include:
• Access to online broadcasts such as recorded class sessions or financial workshops direct from the company’s office or a conference room
• Telephone access so you can have one-on-one conversations with your credit counselor or other credit experts
• Access to archives including previous web conferences or instruction videos and presentations
• A library of informational videos on a variation of topics with the ability to stream or download the video that applies to your situation
Not all debts can be settled with a credit counseling service, online or in person. Some of these types of debts include: IRS issues, lawsuits with creditors, utility bills, student loans, auto loans and other forms of secured debt.
Penalty fees related to credit card debt exceeded $22 billion in 2011.
Initial resistance to using an online credit counseling services comes from a general misunderstanding of how the process works. Most online services provide a mixture of resources from prerecorded sessions to live chat. Just like a traditional credit counseling service, an online credit counseling service is only as effective as the effort you put into it. Clearly, the best time to start looking for realistic debt solutions is now.