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By Mike Killian, <a href="http://www.cardratings.com/?source=sadvice">CardRatings.com</a> Debt/Credit Management Reporter
If I was considering which credit card was best for me, a future need of credit counseling would certainly not be a concern of mine. But if the purpose of getting the credit card was to take advantage of a balance transfer offer or debt consolidation, perhaps it should be.
In a conversation with Jim Young, CEO of Accelerated Debt Consolidation, Inc., I learned some fascinating information on this subject. Jim's viewpoint on the subject is quite contrarian and enlightening. According to Jim,
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<i>"Debt consolidation is usually the last step before counseling for a debt desperate consumer. Interest rates in a Debt Management Program (DMP) vary widely from one credit card company to another. Therefore why not select a card issuer which would be more favorable in the event a DMP becomes necessary?"</i>
This certainly seemed plausible. Jim directed me to the <a href="http://www.debtsynergy.com/html/results.html">DMP Interest Rate Reduction Web page</a> on his organization's website, where you can view exactly what interest you would pay in a DMP regardless of which counseling agency that you utilize.
An example on this page illustrates a $10,000 Citibank debt at 24% with minimum payments of $250 per month. If the cardholder only made minimum payments each month, this debt would take 137 months to pay off and cost $18,934.72 in interest. If this same card debt was enrolled in a DMP, the interest rate on this same Citibank card debt would be lowered to 9.9% and would be paid off in 60 months resulting in a savings of $16,267.59 in interest!
Jim pointed out that,
<i>"Not all card issuers offer the same opportunity. As you can see from the Web page, issuers like Chase offer a 6% rate in a DMP. On the other hand, the rate on Key Bank cards is set at 12.9% and Capitol One even higher.
Therefore if I were considering doing a balance transfer [or opening up a new card account], I would consider card issuers offering lower interest in a DMP in the event a Debt Management Program becomes necessary."</i>
I should add, I have not seen a page anywhere else that offers this type of valuable information. Every debt counselor by law must abide by the same interest rate regardless of tax status or accreditation. There is no negotiation of the interest rate that is allowed. It is etched in stone unless changed by the financial institution itself... not the counselor. I am very grateful that Accelerated provides this information openly and honestly for any consumer to view.
Jim concluded with one more powerful suggestion,
<i>"If a consumer has an low introductory interest rate [on a particular card], don't include this [card] in a DMP until after the introductory period. Similarly, if a card has a permanent [ongoing] low interest rate, don't include that either. And if a debt counselor says you can not do that, find another agency willing to work with your particular situation!"</i>?
Great tips here that could save you thousands of bucks in interest.
If I was considering which credit card was best for me, a future need of credit counseling would certainly not be a concern of mine. But if the purpose of getting the credit card was to take advantage of a balance transfer offer or debt consolidation, perhaps it should be.
In a conversation with Jim Young, CEO of Accelerated Debt Consolidation, Inc., I learned some fascinating information on this subject. Jim's viewpoint on the subject is quite contrarian and enlightening. According to Jim,
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<i>"Debt consolidation is usually the last step before counseling for a debt desperate consumer. Interest rates in a Debt Management Program (DMP) vary widely from one credit card company to another. Therefore why not select a card issuer which would be more favorable in the event a DMP becomes necessary?"</i>
This certainly seemed plausible. Jim directed me to the <a href="http://www.debtsynergy.com/html/results.html">DMP Interest Rate Reduction Web page</a> on his organization's website, where you can view exactly what interest you would pay in a DMP regardless of which counseling agency that you utilize.
An example on this page illustrates a $10,000 Citibank debt at 24% with minimum payments of $250 per month. If the cardholder only made minimum payments each month, this debt would take 137 months to pay off and cost $18,934.72 in interest. If this same card debt was enrolled in a DMP, the interest rate on this same Citibank card debt would be lowered to 9.9% and would be paid off in 60 months resulting in a savings of $16,267.59 in interest!
Jim pointed out that,
<i>"Not all card issuers offer the same opportunity. As you can see from the Web page, issuers like Chase offer a 6% rate in a DMP. On the other hand, the rate on Key Bank cards is set at 12.9% and Capitol One even higher.
Therefore if I were considering doing a balance transfer [or opening up a new card account], I would consider card issuers offering lower interest in a DMP in the event a Debt Management Program becomes necessary."</i>
I should add, I have not seen a page anywhere else that offers this type of valuable information. Every debt counselor by law must abide by the same interest rate regardless of tax status or accreditation. There is no negotiation of the interest rate that is allowed. It is etched in stone unless changed by the financial institution itself... not the counselor. I am very grateful that Accelerated provides this information openly and honestly for any consumer to view.
Jim concluded with one more powerful suggestion,
<i>"If a consumer has an low introductory interest rate [on a particular card], don't include this [card] in a DMP until after the introductory period. Similarly, if a card has a permanent [ongoing] low interest rate, don't include that either. And if a debt counselor says you can not do that, find another agency willing to work with your particular situation!"</i>?
Great tips here that could save you thousands of bucks in interest.
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