There were several reasons why I enrolled in a debt management programme and not debt consolidation or debt settlement. Debt settlement? I wonder if there is any debt settlement plan in my country.

First and foremost, it’s FREE to join the AKPK debt management plan. You are not charged any enrollment fee or monthly service fee. Yes, the DMP provided by AKPK (Agensi Kaunseling Dan Pengurusan Kredit) is free; it comes with zero enrollment fee or monthly service charge.

Since the program is free to join and at that time I had had enough of my piled up credit card debt, I made an appointment with a senior credit counselor in Ipoh branch.

Did I do any DIY debt management to get rid of credit card debt? Of course, I did. In fact, I began budgeting and cutting spending starting April 2007 to pay down my credit card debt before finally signing up with the AKPK program.

In a span of almost one and a half year, I managed to pay down my debt from RM63,809 ($18,000 plus) to RM40,344.

Just as I thought I could slowly pay off my credit card through budgeting and cutting back on spending, bad things crept in one by one.

Firstly, hubby and I were not able to generate more income to pay the bills. Money was always not enough when it came to making payments to credit cards, home and car loans, utility bills and personal expenses.

We started being in late in payments or skipping some of the credit card minimum payments. As a result, late payment fees, penalty charges, over-limit fees, and other miscellaneous fees began piling up and added to my already piled up credit card debt.

One day after watching the AKPK’s TV commercial ad, I decided to pay a visit to the agency and enroll in its debt repayment plan to help me get out of credit card debt without stress.

There were a few reasons why I signed up a debt management plan and not any debt consolidation or debt settlement.

First off, the debt repayment plan I enrolled in is FREE. There is no initial fee or monthly service fee charged by the credit counseling and debt management agency.

Yes, it’s a free debt management program that is only available in my country. It’s not available to people in the US, UK, Canada and other countries.

As it’s a free debt relief program and I had come to a point that I couldn’t go on paying the huge amount of minimum payments, I decided to enroll in the debt management program.

But why didn’t I DIY debt management to pay off the credit card debt?

Oh, I did. In April 2007, I started self-help debt reduction to pay down some of my credit card debt before I joined the DMP. Between April 2007 and August 2008, I managed to bring down my credit card debt from RM63,809 ($18,000 in USD) to RM40,334.

Just as I thought my effort of tackling my credit card debt would pay off if I kept on budgeting and curbing my spending habits, bad things kept popping up.

First of all, the expenses always surpassed the income. Due to economy downturn, hubby and I were not making sufficient money to pay all the credit card minimum payments, car and home loan installments, utility bills and daily expenses.

When we failed to make payments on time, you know what will come next, right? Yup, banks and creditors started charging late payment fees, over the limit charges, cash advance fees, retail interest charges into my credit card accounts.

One day in August 2008, I told hubby that I had had enough of my credit card debt, non-stop phone calls from banks and warning notices issued by creditors. I wanted to get rid of them.

So, I am now in the free debt management program.

If I had been careful when it came to using credit cards, I wouldn’t have gotten myself into deep credit card debt and enrolled in a free debt management program known as AKPK debt management program to help me lower my monthly payments from more than RM1,500 to RM320, reduce interest rates from 18% to 6% or 7%, waive late payments and over-limit charges.

Credit cards, when used in moderation, could be helpful in managing your finances. But splurging through the use of credit cards is almost financial suicide.

To prevent you from acquiring credit card debt that leads you to financial death, let me share with you how you can manage the way you use your credit card.

1. Prioritize Your NEEDS Before Your WANTS. Buying big ticket items that you don’t really need might give you that instant gratification that impulsive buyers are addicted to. But that temporary high would eventually turn to long-term down feeling due to your high-interest added credit card debt.

Imagine after 15 months of owning the 42″ Plasma TV, you are still paying down the amount owed, its interest charges and interest on the owed interest charges! So depressing!

2. Never Go Over Your Credit Limit. In order to be able to manage your credit card payment, never go overboard when it comes to your credit limit. If it’s possible, just use about two-thirds of your limit.

3. Keep the Statement of Your Credit Card Account. For easy reference in future, keep a record of all your credit card transactions.

Always spend some time comparing the list of your purchase for the month with the statement to prevent being charged inaccurately. If your list and the statement of account do not match, report this to your bank.

Self-control is still the best way to prevent getting piled up debt. I have been there before and I tell you, it’s no fun having accumulated debt.

You know how suffocated and stressful I was before I signed up with a free debt management program? My piled up debt was actually caused by late payment fees, over-limit charges and miscellaneous fee charges.

Often times, the term “credit counseling” is used in the same sentence as debt settlement, but actually, it’s a completely different process.

With credit counseling, you will actually work with a credit counselor to pay off your debt in smaller, monthly payments that you can afford.

So, do you really need credit counseling to get you out of debt? You need it if you have been receiving harassing phone calls from bill collectors or if you are unable to make another month’s high interest credit card payments.

Before you attend any credit counseling briefing, it’s important that you choose a good credit counseling agency so that you are not scammed.

Look for a reliable credit counseling agency that is a member of the Association of Independent Consumer Credit Counseling Agencies (AICCCA) or the National Foundation of Credit Counseling (NFCC).

Once you have identified the right credit counseling agency, you’ll have to meet with a certified credit counselor, and provide him with all of the details of your debt.

After a thorough review of your debt, credit history, and a detailed analysis of each of your creditor accounts, your credit counselor will let you know if there is a need for you to enroll in a debt management program.

Once it is determined that signing up with a debt management plan is right for you, your debt management program counselor will negotiate with all of your creditors to reduce interest rates, eliminate late payment fees and lower payments before creating an affordable debt repayment plan that you can live with.

It’s true that working with a credit counseling service can do some damage to your credit report. But if you are at the stage where your last resort is filing for bankruptcy, you would definitely consider a debt management plan in order to avoid bankruptcy or a report full of charge-offs.

If you ever find yourself having problems with paying off your credit card debts, the first course of action is to take a look at the budget. Finding ways to cut back on unnecessary expenses can help you pay down debts and keep monthly bills current.

But what if you can’t settle your debt problems with budgeting? Well, seek assistance from debt help relief options to help gain control over your debts so that your credit rating will not suffer badly.

Debt Consolidation. You may turn to debt consolidation as an answer to your debt problems. Debt consolidation enables you to transfer all your high-interest credit card debts to a lower interest credit card, or you put up the equity in your home to get the money to pay off your debts.

While both unsecured and secured debt consolidation options provide lower payments, they are with some drawbacks. Closing numerous credit card accounts and putting all of your debts into one account can negatively impact your ratio of debt to available credit, lowering your credit score.

And if you use your home equity to secure the money needed to pay off debts, you’re putting your home at an unnecessary risk. You face the risk of losing your home if you fail to make payments.

Credit Counseling. Another popular debt relief option is credit counseling. Credit counseling agencies, non-profit or for-profit, offer help with budgeting, and if it is determined that budgeting is not enough to solve your debt problems, they will sign you up with a debt management program.

A debt management program, also known as debt management plan, involves negotiation with creditors to reduce interest rates, eliminate late payment fees or over the limit charges, and lower payments.

You make one monthly affordable payment to the credit counseling agency’s collection account, and the agent forwards payments to each of your creditors.

A DMP can help you get out of debt faster, but it can also have negative impact on your credit score. As a note is added to your credit report stating that you are in a debt management plan, you no longer can get a new credit card or loan. However, the notation is removed once you’ve settled your debts.

Either you decide to enroll in debt consolidation or a debt management plan, it’s important to make sure you’re dealing with a reputable credit counseling agency that is a member of the Association of Independent Consumer Credit Counseling Agencies (AICCCA) or the National Foundation of Credit Counseling (NFCC).

As AICCCA and NFCC regulate and monitor member agencies to make sure that they operate legally and ethically, you save yourself from being scammed by unscrupulous credit counseling agencies that charge high fees or fail to make payments to creditors on time.

To prevent yourself from facing undue stress caused by spiraling debts and damaging credit score, it’s wise to seek help at the first sign of trouble.

Before you decide to sign up with any of the debt relief options, it’s important to have a thorough understanding of debt consolidation, debt management program or debt settlement plan so you can choose the option that best suits your needs to help you settle your debts.

Debt Consolidation. Debt consolidation comes in two forms; secured and unsecured.

Secured debt consolidation is the action of combining several loans or liabilities into one loan; it takes all of your high interest credit card debts and turns them into one low interest loan.

Often you have to be a home owner to qualify for a secured debt consolidation loan called home equity loan.

With a much lower interest rate than your credit card interest rates, secured debt consolidation enables you to pay on the principle and that thus helps you to eventually get yourself out of debt.

But a word of caution, though. A home equity loan is a secured loan; the bank can take away your house if you fail to make payments.

Debt Management. Credit counseling and debt management agencies, be it non-profit or for profit, work to help you learn to get control of your finance.

Through debt management, you are educated on how to make a budget and stick to it and often help you make a schedule to follow for paying off your debts.

If it is determined that credit counseling is not enough to help you get you out of debts, you will be recommended to enroll in a debt management program.

A debt management program, also known as debt management plan, restructures your multiple monthly payments into one monthly payment, and thus resulting in lowering the total monthly payment previously paid.

When a DMP is recommended, a certified credit counselor will be in charge of negotiating with your creditors to reduce interest rates, eliminate late fees and over-limit payments, and create a manageable repayment plan for you to follow.

A debt management plan is right for me, therefore I enrolled in a free debt management program available in my country last year. I have been in the program since October 2008.

Debt Settlement. Debt settlement is an approach to debt reduction in which the debt settlement company renegotiates the amount of debts you owe with your unsecured creditors and convince them to give up their demands for the full repayment of your debts and instead to accept a lesser amount.

See the difference between debt management and debt settlement clearly; debt management means paying a monthly payment while debt settlement means paying the whole amount up front.

In order for the debt settlement program to work, you have to have a large amount of money on hand for a one time sum. Inability to meet this requirement will probably end up with you getting calls from a collection agency and facing with even more debts.

Debt consolidation, debt management and debt settlement are often favorable debt relief options because they allow you to get out of debt faster without having to declare bankruptcy.

Of course, not everyone believes that credit card debt counseling can help you be debt free. This has got to do with the many scams reported trying to make quick money from people who are already drowning in debt and desperately in need of debt relief.

As not all credit counseling and debt management companies are genuine and provide good advice, choosing a reliable credit counseling company becomes a critical factor in determining the success of credit card debt counseling.

As a general rule, go for a reputable non-profit credit counseling agency that is affiliated with the National Foundation for Credit Counseling (NFCC), usually known as Consumer Credit Counseling Services (CCCS).

A legitimate credit counseling agency can help you in not just getting rid of your credit card debt, but eliminating it in a way that is so cost effective. In other words, your credit card debt gets to be settled much quicker than if you were trying to do it all by yourself without any credit counseling.

Moreover, getting help from a proper credit card debt counseling can save you a lot of time and energy that you would have otherwise spent on studying all about credit card debt, gathering information about various credit card debt relief options and comparing them.

Further, the various financial solutions such as credit counseling, debt consolidation, debt management programs, debt settlements and bankruptcy provided by the credit counseling company enables you to choose one that appeals the most to you.

There is no doubt with regards to the endless benefits credit counseling can bring to you. However, you have to be careful with fly-by-night companies to avoid being scammed into paying tonnes of monthly service fee and leaving you with more debt than ever.

Here are a few simple debt management tips that you can use without having to go to an expensive financial counselor.

1. Cut Up All Your Credit Cards. This is the best way to stop adding new debt to your existing credit card debt. If you have no credit cards, there will be no more excuses such as keeping one card as ‘emergency card’.

Have you ever set aside a card with the lowest interest rate for emergency use? Is it really used for true emergencies or has it been maxed out already because of the best buy TV or deep discounted iPhone? If so, stop giving yourself any lame excuse to keep a card for ‘emergency purposes’.

2. Move Your Multiple Debts to a Lower APR Card. If you have multiple credit card payments, you may consider moving the higher APR multiple debts to one with a lower APR. This will lower the interest charges and help you get you out of debt faster.

3. Use Dave Ramsey’s Snowball Method. This Dave Ramsey Snowball Method has worked for many people and you should give it a try if you haven’t.

This is how it works: List each of your credit card debt, and the amount you are paying each month. Start tackling the card with the lowest amount first. Then use that money to start paying off the second lowest amount. And then the next and the next.

Confusing? Well, here is an example.

Let’s say you have a $7,000, $5,000, and $2,000 credit card with payments of $150, $125, and $100, you will finish paying off the $2,000 card first.

Once it is settled, you take that $100 and put it towards the $5,000 credit card. That means you are now paying $225 per month. You have increased your monthly payments which will pay off that credit card sooner and will have you paying a lot less in interest.

Once that is paid off, you apply the $225 to the $7,000 card, making your monthly payment $375. This will greatly speed up the payment of this card, reducing your interest payments even further.

When every card is paid off, you now have $375 per month extra to put towards savings, emergency funds or investments!

4. Consider Debt Consolidation. If you own a home, you may want to consider consolidating all your multiple debts using a home equity loan.

A home equity loan has a much lower interest rate than your credit card interest rates. The best part is that it’s tax deductible.

But a word of caution, though. A home loan is a secured loan; the bank can take away your house if you fail to make payments.

By following these 4 debt management tips, you can completely pay off your credit card debt without the need of enrolling a debt management program like I did or resorting to debt settlement plan or declaring bankruptcy.

I understand. I have been in your shoes before enrolling a free debt management program in my country.

OK, take a breath and look at your debt with a clear head. Is your debt so unmanageable that you can’t even make next month’s minimum payments? If so, you should consider either credit counseling, debt consolidation or a debt management program.

Debt management program, also called debt management plan, is a program designed to help you get out of debt by combining all your multiple debts with various interest rates into one monthly repayment that you can afford.

This means no more driving to different banks to pay various cards on different due dates. In a debt management program, you just need to make One monthly payment to One agency on One due date!

The affordable monthly payment that your certified counselor works out with you is a fair amount of cash so that you have some extra money saved for yourself as emergency fund.

Once you are placed in the debt management program, all your creditors will cancel your card accounts. This is good because you will have no way to add new credit card debt to your existing debt; no excuse to use them for so called ‘emergency needs’. If you have no credit cards, you can’t be tempted to use them.

Once you have extra money left every month, it’s important to start saving 5%-10% of your income as emergency fund. As for new purchases, save until you have enough money to buy them with cash. Remember the immediate gratification of making purchases through credit cards that threw you into the deep debt hole? You wouldn’t want it to happen again.

If you are able to stay in the debt management program until your debt is paid off; do not add new debt to existing debt; and save up the extra money for emergency fund, it’s for sure that you can make your way out of debt pretty soon.

According to financial experts, you probably do not need any debt consolidation or debt management if you are able to make your current payments and have reasonable interest rates.

However, if you are suffering from so much unmanageable debt that you are unable to make ends meet and make even the minimum payments, then there is a need for you to really consider if a debt consolidation loan or a debt management program is right for you.

What’s the difference between a debt consolidation loan and a debt management plan?

Debt Consolidation. Debt consolidation is a process where all your multiple debts and loans like credit cards, car loans and other high-interest debts are lumped into a loan with one monthly payment with lower interest rate. With reduced monthly payment and interest rate, you can pay off your credit card debt faster.

The catch is such loan requires that you own a house, so that the loan can be taken against equity in the home. There are risks involved with putting your house up for collateral on a debt consolidation loan.

If unfortunately something unexpected happens to your income and you find that you can’t make the proposed loan payment, you could lose your house.

This is one of the major reasons why I opted for a debt management program rather than debt consolidation.

Debt Management Program. During a free consultation, a certified credit counselor will only recommend a debt management program after going over your income and expenses and finding that credit counseling is not enough to bring your financial back to a manageable level.

If it is determined that a DMP is right for your, the credit counselor will negotiate with all your unsecured creditors to obtain the lowest monthly obligation that satisfies all your current accounts.

Being put in a debt management program means that you make only ONE payment with reduced interest rate to One credit counseling agency on One due date; you no longer have to be stressed by paying multiple credit card payments to various banks on different due dates.

Most important of all, all late payment fees and over-limit charges are waived once you are in a debt repayment plan. No more harassing phone calls from banks, warning notices from creditors and annoying visits by third party collection agencies.

No matter which debt relief program you choose, be it a debt consolidation loan or a debt management program, your ultimate goal is to pay off all your debt and bring your finances and credit score back to the right track.