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Credit Counseling vs Debt Management

When you have a significant amount of debt, it can be difficult not only to stay caught up on the bills, but also to figure a way out of that debt. One of the first steps that many people take is to simply cut up their credit cards. While that is a good start, it is not the answer to tackling your debt. There are additional steps that must be taken if you have any hope of controlling your debt.

Many companies offer credit counseling or debt management. It can be easy to be confused by the myriad advertisements for credit counseling and debt management that flood the airways and the information highway. And while many of these companies have nothing but the best of intentions, it is critical that you do a significant amount of research before choosing a company to help you.

Is Your Debt Out of Control?

Many people don’t understand or never learned about living beyond your means. Credit card companies send out millions of letters every day trying to get new accounts opened by consumers. These companies don’t take into consideration your current debt situation (unless it is dire). They simply ask for your personal contact information, your income, and then make you an offer on a line of credit.

These companies also sway people with the offer of 0% financing and no annual fees in their marketing materials. However, many consumers don’t read the fine print. The 0% financing is only valid for a short time period (usually 6-12 months), it doesn’t apply to cash advances, and the no annual fees offer can also be limited to just the first year. If you are considering a new credit card, read all the fine print before signing up.

Here is an example of an offer found online at

APPLY NOW on Discover’s website, or call (800) 347-0264 Great for: Bonus Categories and First Year Cashback Match Discover it® Cash Back INTRO OFFER: Discover will match ALL the cash back you’ve earned at the end of your first year, automatically. There’s no signing up. And no limit to how much is matched. - Earn 5% cash back on everyday purchases at different places each quarter like grocery stores, restaurants, gas stations, select rideshares and online shopping, up to the quarterly maximum when you activate. - Plus, earn unlimited 1% cash back on all other purchases - automatically. - Redeem cash back any amount, any time. Rewards never expire. - Use your rewards at checkout. - Get an alert if we find your Social Security number on any of thousands of Dark Web sites. * Activate for free. - No annual fee. - View Rates and Fees See additional details at Discover’s website

You’ll notice that the advertisement is all about the benefits you get if you have this particular card. But notice at the end, there are links for “View Rates and Fees” and “See additional details at Discover’s website”. When you click on the first link, you get this:

Important Information - Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 0% intro APR for 14 months from date of account opening. After the intro APR expires, your APR will be 13.49% to 24.49%, based on your creditworthiness. This APR will vary with the market based on the Prime Rate.

APR for Balance Transfers 0% intro APR for 14 months from date of first transfer, for transfers under this offer that post to your account by June 10, 2020. After the intro APR expires, your APR will be 13.49% to 24.49%, based on your creditworthiness. This APR will vary with the market based on the Prime Rate.

APR for Cash Advances 26.49%. This APR will vary with the market based on the Prime Rate.

Penalty APR and When It Applies Your due date is at least 25 days after the close of each billing period (at least 23 days for billing periods that begin in February). We will not charge you any interest on purchases if you pay your entire balance by the due date each month.

Minimum Interest Charge - If you are charged interest, the charge will be no less than $.50.

To learn more about factors to consider when applying for or using a credit card, visit the website of the Consumer Financial Protection Bureau at

FEES Set-up and Maintenance Fees/Annual Fee None

Transaction Fees Balance Transfer - Intro fee of 3% of the amount of each transfer for transfers that post to your account by June 10, 2020 with the 0% intro APR balance transfer offer described above. After that, 5% of the amount of each transfer. Cash Advance - Either $10 or 5% of the amount of each cash advance, whichever is greater.

Penalty Fees Late Payment - None the first time you pay late. After that, up to $40. Returned Payment - Up to $40.

You will also get pages and pages of details about how they calculate your balance, other fees that can be incurred, and other legalese that no one wants to read – but they should. When you click on the second link, it is basically the same information, just presented differently.

So, you may think that transferring debt from another card to a new one will save you money – and it will, for about 12-14 months. Then, you are responsible for paying the new APR interest fees and you’re no better off than when you started.

The primary reason people take advantage of these offers is to keep up appearances. They want to seem like they are financially solvent, can afford to live big, and have nice houses and cars. The only problem with that is when the debt overcomes your income and you simply cannot keep up with the payments any longer.

At that point, you need to start considering either credit counseling or debt management to get your financial situation under control.

Credit Counseling Defined

If you’re ready to get a better grip on your debt and better organize your financial situation, credit counseling might be an option. Credit counseling is usually very inexpensive and provided by nonprofit organizations that specialize in financial education for consumers. They will take a look at your budget, credit report, and level of debt. Their ultimate goal is to help you improve your financial situation.

You will be assigned a credit counselor who will work with you, giving you tools and resources for getting a handle on debt. Credit counseling sessions can happen in person or over the phone. The counselor will take your information and then give you feedback on how to make positive changes in your finances. According to, counselors can offer the following:

  • Low-cost budgeting help (don’t pay for materials or workshops)
  • Low-cost review of your credit report(s)
  • Steps on how to improve your financial situation
  • Referrals to other tools and resources

So, credit counseling is about getting the education you are lacking about how to manage finances appropriately. Credit counseling services that offer you loans or consolidation options are not looking out for your best interest. Those types of services are part of Debt Management Plans, not low-cost credit counseling.

Once you have a plan in place, your credit counselor may follow up with you to see how the plan is going. If you need additional assistance, you may be able to schedule another follow-up session, as well.

Debt Management Defined

If your financial situation calls for it, a credit counselor could recommend a debt management plan. These plans reduce your debt more quickly by getting creditors to lower your interest rates and creating a payment schedule that goes beyond minimum payments. Generally, this is considered a last resort, so if a credit counselor pushes this right away, go to a different counselor.

The experts at Nerd Wallet give you some great general advice about whether or not a debt management plan is the best choice for you. You may want to consider it under the following conditions:

  • Your unsecured debt, like from credit cards, is between 15% and 39% of your annual income
  • You have a steady income and think you could pay off your debt within five years if you had a lower interest rate
  • You can get by without opening new lines of credit while on the plan

It is critical that if you choose a debt management plan, you stick to it. If you miss payments, your creditors can dissolve the agreement and you are back where you started, having lost the fees you paid to set up the program (generally less than $100).

Debt management plans aren’t the best choice for every situation. Depending on the agency, only 10% to 20% of clients end up using this debt relief option. Of those who do, about 50% to 70% complete the plan, depending on the year and how the agency reports completions (

But there are definitely pros and cons to using a debt management plan:


  • Cut your interest rate significantly
  • Pays off debt faster than going it alone
  • Can consolidate multiple debts into a single payment


  • Is primarily used for credit card debt; you can’t use it to help pay off student loans, medical costs, or tax penalties.
  • It’s a long-term plan (three to five years), and you can’t use credit cards or get new lines of credit when you are on a debt management plan.
  • Missing payments – even just one - can disrupt the plan and end your interest discounts.

If you are in a bad financial situation, and are on the verge of losing property or assets, it’s definitely in your best interest to consider both credit counseling and debt management.

Credit Counseling with CC Advising

When you find yourself in a situation where you are considering credit counseling, it can also help you determine if filing bankruptcy is actually what you need to do. Federal law requires that all applicants for bankruptcy first complete a credit counseling course to learn about all of the relevant non-bankruptcy options for resolving their debt. Bankruptcy may not seem like an attractive option, but it is just one more instrument in the financial management toolbox.

Credit counseling courses offered by CC Advising include information about the following:

  • Credit cards and other debt
  • Assets
  • Getting debt under control
  • Budgeting
  • Alternatives to Bankruptcy

At CC Advising, your particular financial situation is reviewed by a certified credit counselor. They review your debt to income ratio, your budget, your assets and debts, and review with you any and all possible alternatives to resolve your debt issues that may be available in your circumstances. Specifically, the counselor will be analyzing your financial situation, talking about the circumstances that caused that financial situation, and assist you in creating a plan to respond to those problems without getting into more debt.

After your first counseling session, you and your counselor can determine if completing a course is your next step. Once you complete the credit counseling course, you will receive a certificate to give to your bankruptcy attorney to be filed directly with the court. But the goal is that, through credit counseling, you can make positive strides in controlling your debt, and if you do decide to file bankruptcy, be well positioned for financial success afterward.

Debt Management Programs

While CC Advising doesn’t offer debt management programs, there are several reputable programs out there that offer help with debt management plans. When researching your options, make sure the program you choose is run by a non-profit agency. For profit agencies will charge higher fees and will only work with certain financial institutions they have business relationships with.

When you sign up for a legitimate DMP, you will make one lump sum payment every month to the nonprofit agency. Then, the agency sends the money straight to your creditors. When you engage in this type of debt management program, you may be lucky enough to get reduced finance charges or fees – or they can even be waived entirely! It also stops those annoying calls from collection agencies.

Working a debt management program allows your accounts to be credited with every dollar you pay. When you are done with the payments, your participation and active repayments can help you re-establish credit. A debt management plan makes your credit score better as you pay off debt.


When your debt becomes overwhelming, don’t just give up! Engage the services of a credit counselor to help you learn how to better handle your debt, make arrangements with your creditors for lower rates and fees, and make a plan to get out of debt as quickly as possible.



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