Issue #9 - The Hidden Costs Of Credit Card Debt Services

*************************************
Debt Reduction Academy Newsletter
Vol. 2, Issue #9 - January 15, 2009
*************************************

William here, with another issue of the Debt Reduction
Academy newsletter.

This week's article is:

===> The Real Cost Of Using A Credit Card Debt Service To
Get Rid Of Your Debt For You - And Why You Should Think
Twice (At Least) Before Using One

Fox News released the results of an interesting poll
yesterday. According to this poll, 80% of Americans think
that debt - both government and personal - is ruining the
country's economy.

It's interesting that while so many people think it's doing
more harm than good, the "stimulus packages" and bailouts
continue.

Personally, I think if we continue to bail out companies and
people who make bad decisions, and continue to extend more
and more debt, we're just digging a deeper hole. We're
facing the consequences of the last several years now, so
where are we going to be in several more if these things
continue?

What about you? How do you feel about how the government is
handling the current situation (and it's not just the US
government, it's happening around the world)?

I have a feeling things are going to get worse before they
get better…

William

IN THIS ISSUE:

1) Sponsor advertisement:
2) Reader Q & A
3) Announcements
4) Main article: #Normal Title#
5) Newsletter archives

++++++++++++++++++++++++++++++++++++++++++++++++++++

1. SPONSOR ADVERTISEMENT

Would you like to live a greener, more environmen-
tally friendly life and save money at the same time?

In spite of what you might think, both are possible.

Find out how you can do it on the How Can We Go
Green website:

http://www.howcanwegogreen.com

++++++++++++++++++++++++++++++++++++++++++++++++++++

2. READER Q & A

This week's question:

Should I withdraw money from my 401k to pay off
high-interest debt like credit cards?

Generally, it's not a good idea. There are several reasons
for this:

First, with the way the market has been over the past
several months, if your 401k is heavily invested in stocks,
chances are pretty good that it has lost value. As long as
you leave the money in the 401k, that loss is only on papert.

As soon as you withdraw money from the 401k, any losses that
you've accumulated become "locked in" because that money is
no longer able to increase in value.

If you have more than 5 years until retirement, it's almost
guaranteed that you will make back any losses that you've
experienced as the market rebounds.

Second, when you withdraw money from your 401k, you have to
pay income tax on that withdrawal since it's effectively
"income". You may also have to pay withdrawal fees,
depending on how your 401k is set up.

That means that you'll actually have to withdraw
considerably more than what you need to actually pay off
your debt, possibly up to twice as much if you're in a high
tax bracket.

And finally, when you withdraw money from your 401k, you're
going to lose any future earning potential of that money.
And you probably won't be able to "replace" it down the
road. If you're a long way from retirement, this can be a
significant amount lost.

++++++++++++++++++++++++++++++++++++++++++++++++++++

3. ANNOUNCEMENTS

ONE: Follow me on Twitter

http://www.twitter.com/debtsmackdown

That way, if you don't get my emails for some reason, you'll
get my Twitters.

TWO: Do you have a question?

Do you have a burning question that you'd like me to answer
in this newsletter?

You can submit your questions through the website here:

http://www.debtreductionacademy.com/contact.php

I can't promise a personal response, but I'll do my best to
answer your questions in a future issue of the newsletter.

++++++++++++++++++++++++++++++++++++++++++++++++++++

4. FEATURED ARTICLE

The Hidden Costs Of Credit Card Debt Services

Credit card debt services offer to help you negotiate better
deals with the credit card companies, settle your debts, and
various other things. They sound like they are a good way to
deal with debt, but that isn't always the case.

There are several potential problems that you can run into
when using these services. Let's look at a few of them…

It Can Impact Your Credit Score

When these services contact your credit card company, they
will often put a note on your credit report about the
situation. This can cause your credit score to drop, and can
also cause you to be declined for other items because they
are there.

It Can Cost You More

Many of these credit card debt services work by taking a
lump-sum payment from you and then distributing it to all
your credit card payments.

If they don't make the payments on time, you can wind up
paying more in interest costs as well as late fees that get
added to your next bill.

Because you are not in control of these payments, you are
not able to manage them as effectively.

It Can Lead To Legal Issues

You can still be sued when using a debt settlement company
to handle your debt. Unlike bankruptcy, it does not give you
any kind of legal protection so you are still at risk of
being sued.

Tax Consequences

If the debt service manages to get some of your debt
canceled for you, it can have tax implications. You will be
taxed on the amount that is canceled, as it is essentially a
form of income for you.

As you can see, there are a number of potential issues when
dealing with a credit card debt service. Before taking that
step, you should always ensure that you have taken all the
steps possible to get your debt under control yourself.

++++++++++++++++++++++++++++++++++++++++++++++++++++

5. NEWSLETTER ARCHIVES

I'm in the process of getting all the previous issues of the
newsletter posted on the Debt Reduction Academy website.

Once they're posted, I'll include a link here in the
newsletter.

A lot of the questions I get from people are repeated over
and over. If you've got a question, I might already have
answered it in a previous issue, so you'll be able to check
soon.

Copyright 2009 Nichescape Publishing Inc.