What Happens to my Credit Cards When I Put them on a Debt Management Plan?

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What Happens to my Credit Cards When I Put them on a Debt Management Plan?

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If you are considering enrolling in a Debt Management Plan or have just enrolled you may be wondering what will happen with your credit cards.


When you place an account on a Debt Management Plan you are asking the creditor to give you a break by lowering the interest rate on the account.  This allows you to pay the balance off sooner but also impacts the creditor’s revenue. In essence, they are lessening the amount of money they will earn from you by accepting you on a DMP.


Here are the answers to your questions regarding your accounts enrolled in a Debt Management Plan. 


Is it paid off? 

No, the account is not paid off. Your debt relief provider is not a lender and they do not lend money to people to pay off their accounts. Taking out a loan to pay off your credit cards doesn’t work in most situations. I refer to this as simply transferring debt. It was a popular option a few years ago for people who owned a home and we are now seeing the end result. Your debt relief provider will work with your creditors to reduce interest rates and late fees and get your debt paid off sooner.


Can I still use the account?


No, when a creditor accepts you on a DMP they often eliminate late fees and reduce the interest rate because you have incurred more debt than you can handle.  Creditors do not want you to keep using this account and incurring more debt.


Is the account closed?


Yes, the account is closed, either by the creditor or by you, when it is enrolled in a DMP. This is the only way the creditor will accept the account and begin to offer benefits on the plan. Not using credit cards while on the plan is one of the key principals of a DMP.


Can I use the account when the plan is done?


No, the account you placed on the plan is closed, and can no longer be used, even when it is paid off. You are able to reapply for a credit card with the same bank again and depending upon several factors, the bank may or may not issue another credit card. The real question to ask is why do you want a credit card after becoming debt free?


Will I be able to have credit cards again after the plan is over?


This answer depends on several factors that include, your credit history, income, and other outstanding debts you already have. Again, the question to ask here is “Why do I want a credit card?” A debit or check card fits the bill for just about every instance that a credit card would work.  


Rob Taylor   

Rob Taylor is a contributing author for A Straight Talk on Debt. Rob tells it like it is when it comes to the latest debt industry news and shares his advice on personal finance.



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  • I believe this is a good idea, but maybe not so harsh. I know the point of this program is to pay off your debt but i don't think your accounts that are on this program should be fully closed.

    There should be a way that the creditors should just place a hold on your account, which will stop you from further using the card. Then when you have everything paid off, they should allow the account to become active again.

    I know that the credit card or the account you once had opened was the reason why you were in debt in the first place, but nowadays you can't go without a credit account. Everyone uses credit in today's society.

    You have to have some type of credit history to get low rates on necessary things such as house mortgages, auto loans, etc.  

  • Closing the account is the only way to be truly debt free.  Yes everyone uses credit but when you've used it to the point where you've spent more than you can pay back it's time to take a new approach.  If the accounts were to remain open it would only be a matter of time before they were put to use again.

  • I aggree with both points above...that being said, most of us on this type of program (myself included) do not handle credit responsibly and should look for alternatives to opening lines of credit again.  

    I have found over the past year that there were other ways to deal with things I used to use credit for just becuase I thought I had to (hotels for business, airfare, etc.).

    I will be happy to be "debt free" and do not worry about weather I will have a credit card or not.  If I can't afford to do it with cash, I'm not doing it!

  • It is a catch 22. Emergencies happen, and that is when a credit card comes in handy. But you also have to be responsible with the credit. I originally got on the plan because my current job was not allowing me to earn enough money to keep up with payments on time. Now, I make almost $10k more a year with my current job and have caught up on CC bills.

    I agree, accounts should be allowed to be temporarily closed in some instances. Perhaps you can talk to specific creditors to allow it to be reopened. But don't do it with all of them. I have noticed that all of mine still say I have credit available. One says closed to future purchases.

    I didn't have a problm with credit. My credit score was 744 before I went with care one credit. And it is still around 740. But I couldn't get a personal loan to consolidate CCs into one payment. So this was the only option. I wasn't making enough income to get a personal loan. Maybe once I cut my debt in half, I might evaluate and see about getting off the program early and get a loan for the rest. Or I can finish up on the program.

    It's a case by case situation. I personally will get a new CC if all of them are closed. But it will be the only one I will have and it will be only for food, gas, and emergencies. Which is what CCs are really for. Not for uncontrolled spending. I knew that, but ignored it. But I also didn't have as much debt as many of the people on the program had. I have less than $10k on it plus another $3400 with Dell which is under control because I know not to use it. I also only owe about 50% on the card.

    So each of you have to look at it from your personal standpoint. But being on the program allows you to put some money into savings and still get out of debt faster then not being on it. Good luck!

  • Does this program negatively affect credit scores? I one want to purchase a car or a home, will placing your credit cards into this program bring down one's FICO score.  If so, how can you bring your score back up again without the use of credit?

  • rcooper,

    It will lower it some. I think it depends on what yout Credit Card companies do. For instance, I have only had 2 out of 6 formally acknowledge I am on the program. My credit score went from 744 to 739. And I am ok with anything 700+. I am not sure what the FICO score is but I am sure it works the same as your credit score. But once on the program, you cannot get any loans. It would end the program and you could be in worse debt then before because of fees from the CC companies.

  • I've been on the program for 6 months and my credit score went down 100 points..........I'm very sad.  I worked very hard to keep it up and now........

  • Yes your credit score will be lowered. I was in the high 700's when i got on and now im in the mid 500's. I have been paying on the DMP for about 3 yrs. In that time ive personally paid off 2 CC and a Car loan. Had the car before the DMP. So far with monthly payments and the loan/cc paid off. My credit score dropped more than 200 points. =( So yes expect to see the score go down. Hopefully very soon i will be out of debt completly and i can inform you folks on how much it takes to build the score back up.

  • tkiddjr is incorrect about getting a loan while on this program.   I was just on the plan for a few months when my car broke and the repairs would be more than the car was worth so I had to purchase a new car and had no problem doing that.  We are now buying a house, only stipulation was that we had to be on the plan for 12 months to do that.  So every situation is different.

  • I wish I had never got any credit cards, the creditors charge such high finances,  Once my plan is paid off if I can't purchase with cash or a debit/check card I don't need it.

  • I am very thankful for Credit One....made calls to 5 other agencies and they either hung up on me or I hung up on them....find one that is legit is not easy.  I used to work in collections over 15 years ago and it is not quite the same since everything went digital.  I personally tried to contact all my creditors and ask for a debt relief program to reduce my % rate or something along that line.  The first step was actually getting a human being that could actually assist you....rediculous.  However, once I found that person or dept., NONE of them would work with me on an individual basis.  However, with Credit One, since they are a business and are bound by contractual agreements, they had no issue.  All of my creditors accepted the program.  As far as my credit score, yes it went down, but it would have been worse if I had started to make late payments etc.  As someone stated above, you can still get credit while on the plan based on your income....you will pay a high perctage rate though on whatever it is you get a loan for since they consider you high risk.

    Since being on the plan for 2 months, I am moving forward and not backwards.  I have been able to drop one huge weight off my shoulders.  Now for the other side :-).

  • Great question about the credit cards. Hopefully my credit score will look better after accounts are paid off.

  • Being debt free would be such a blessing.  I'm hoping that the programs teaches me how to save for what I want in the end.

  • I've learned if you cant pay for it with what you got you cant afford it.. credit cards were just bail outs and ways to help save some money when it should of been the other way around paying off whatever you purchased and being broke if you were spending everything you got. Figure it out people you live once. You live on the streets or you build your dream home.. Start today never too late.

  • You people make me laugh that say if you can't afford it, don't get it.  What do you do if out of the blue you go to a dentist because of a painful tooth and it ends up to be a $3000.00 bill?  Or your car is making a funny noise and it's still not fixed after a couple grand.  Credit cards are for emergencies. But I'm on disability with a fixed income and have no hope of making a larger income.  None of my credit cards are maxed out. I have never made a late payment or received a collection call.  But my minimum payments have put me in the poor house. I'm assuming you must have parents or some other source of getting money for emergencies.

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