Credit Cards After Debt Management
Using Credit Cards after Debt Management
The ramifications of using credit cards after Debt Management should be known and understood by anyone who is entering into a Debt Management programme. Debt Management programmes are very helpful ways to make the paying off and handling of multiple debts more controllable. When you enter into one, however, you need to be aware of how it will affect your financial situation both during the programme’s course and after. One of the key areas where this will take an effect is the use of credit cards.
Credit Cards during the Programme
Debt Management Programmes work by consolidating all the debts you owe into a single, affordable payment. The company you enrol with look into your monthly budget then settle on a sum which you will pay to them through which they will pay your creditors. They will re-negotiate the terms of your repayments with the creditors themselves in order to freeze your interest rate and lower the amount you pay. The amount they take each month will be enough to cover the renegotiated payments while still leaving you enough money to cover your living expenses.
Therefore, if you are enrolled on a Debt Management scheme you shouldn’t need to put anything on credit. The budget you have drawn up with the Debt Management Company should cover the cost of living and any other spending (during the duration of the programme) should really be considered an unnecessary extravagance. Remember the idea is to get out of debt so using a credit card is generally seen as a bad idea in Debt Management.
Though it is not directly against the law to use credit while in a Debt Management Programme, some banks and building societies will consider it fraudulent. This is due to the fact that all Credit Cards are granted on the understanding that you will eventually pay it back. When you use one you are entering into a contract with the provider saying you are sure you will be able to repay them in future. If you are enrolled in Debt Management you cannot be sure that you can honour that contract, so it is, essentially, a fraudulent agreement.
Using a company Credit Card which you do not have to make the repayments on is generally considered O.K. if you are enrolled in Debt Management. You should, however, make sure your Debt Management programme is aware that you may use this before you begin consolidation. This will help avoid any confusion further down the line.
Applying for Credit after D.M.P.
When you’re programme is finished and your debts are paid in full, you will probably want to apply for a Credit Card and use credit products again. Certainly, as long as you feel you are financially steady enough to do this you are fully entitled to use a Credit Car and the fact that you were once in Debt Management should not affect your ability to get one. The financial problems which brought you to the point of enrolling in Debt Management, however, may have had a bearing on your credit rating and any missed payments or penalties will still be on your credit record.
Using Credit Cards after Debt Management is not impossible though, if you are still in the course of paying off debts, it is not advisable. Once you are finished paying debts you shouldn’t have too much problems reapplying for and using a credit card, although your rating will be as good or bad as it was when you first consolidated your loans. After that it is simply a matter of using your card wisely and not amassing debts again.