Credit card debt consolidation seems to be the buzzword in financial circles these days, given the fact that the economic crisis only seems to be getting worse. You see the ads on TV, radio, and the net. We keep hearing about the virtues of debt consolidation and how these programs not only help consolidate your debt, but also offer to reduce it. Seems too good to be true? Well, as a matter of fact, it often is. Read on to find out the truth behind credit card debt consolidation and reduction.

The Offer
Here is the rosy picture that is painted in front of a vulnerable customer who is unable to make the minimum payments on his credit cards by a credit card debt consolidation program. The customer is asked to stop making any payments whatsoever and start saving the money that they would otherwise have paid to credit card companies. Once the saving becomes large enough, it can then be used to settle debts with credit card companies. Credit card companies are willing to settle for less than the total amount owed, if paid in lump sum. Presto! You are out of debt, and without having to pay the entire amount either thanks to credit card debt reduction measures.

The Truth Behind the Offer
While the program sounds great on paper, it does not actually work so well in real life. A person who is unable to make minimum payments on his credit card dues is unlikely to be able to save a large lump sum in a short amount of time. Without this lump sum amount, he is unable to settle his debt and risks getting chased by third party collection agencies. This concept of credit card debt consolidation simply does not work. On the other hand, the debt keeps getting bigger since the customer has stopped making any payments. Late fees, non-payment charges as well as interest keep accruing until a settlement is reached. So in reality, this concept of credit card debt reduction also does not work. Plus if you think your credit was bad before, it will be really shot now that you haven’t been making any payments at all.

The Scam
The main reason this credit card debt consolidation scam is working is because people are desperate to get out of the situation they find themselves in. More and more people are finding that they are unable to pay back their debts and are looking for options to resolve the situation. These credit card debt reduction companies prey on such vulnerable people and on their ignorance of how the system really works. Moreover, they make a huge profit as their services are not free. In some cases, you may actually end up paying these companies over 20% or more of your outstanding debt just to use their services.

How to Reduce Credit Card Debt?
In reality, there is only one simple way to actually implement credit card debt consolidation. Get a 0% APR credit card and consolidate as much of your debt on it as possible. Just keep making your minimum payments or more, in a timely fashion. However if you don’t have the credit score necessary to open a card, you should talk to your credit card company to see if you can work out a payment plan with reduced payments. Remember, there’s nothing a debt settlement company can do that you can’t do on your own. There’s a post on here about the “talk to your credit card company” free service which was recently launched by the major banks and issuers.

Whenever you get a lump sum amount, use it to clear as much of your debt as possible. Over time, you will find yourself debt-free. But most important of all, you will also have paid off your debt with a clean credit report.