Consumer Credit Counseling and Debt Settlement are two competing courses of action for those struggling with near insurmountable debt in today’s America . Each choice has its own pluses and minuses which are examined here.

Consumer Credit Counseling (CCC) is a system whereby typically “non-profit” (note that non profits bring in plenty of ‘profit’ as you and I would see it) companies negotiate with credit card companies on behalf of clients to reduce high interest rates on credit card debts. The plus side here is that the client saves money as the interest rates get reduced, often substantially and so the monthly payments get lower and the total payoff term becomes much lower, usually 3-5 years.

There are many downsides to CCC. First, the service only applies to certain types of debts, namely current or near current credit card debt. Credit cards that are late 90 days or more, collection debts, charge offs, and other debts can be included but no money will be saved, and in fact the client pays more money as per the CCC Company’s fees. In effect the client is paying the CCC Company to simply pay the creditors just as he/she would do themselves. Also, CCC appears as a “flag” on credit reports which states they are in such a program. This combined with the fact that open credit card accounts get closed down in CCC can have a dramatic effect on one’s credit scores and the way in which creditors perceive the client. Lastly, this program is one in which all the debt gets paid plus interest (lower interest) so there really is not substantial savings in many cases relative to the downsides.

Debt settlement allows clients to build up funds in a trust account so the debts can be settled. The savings are very dramatic as compared to other options. Even once one considers all fees involved a client can easily expect to save 40% of their debt. Like CCC, credit damage is a part of the program and is typically worse than CCC as accounts often go into collections. But no “flag” appears on the credit report. When clients see payoff quotes for both programs, debt settlement is typically less than half of what CCC would cost, and many decide that debt settlement is a better option for them.