Millions of people get into trouble every year with credit card debt. But as it gets tougher and tougher to make payments, they enter a world that is full of uncertainty, with new terminology, procedures and even threats to their financial futures. If you or someone you know is in that position, here are some explanations — and options:

What account closure means

Just because a credit card company closes your account does not mean you do not have to pay the existing balance. What the company is canceling is not your debt, but your ability to make new charges to the account. Additionally, paying off a delinquent credit card does not mean that the information will be removed from your credit report. A delinquent account will remain on your credit report up to seven years, even if the balance has been paid off.

Paying off closed accounts

If you have an account with a credit card company that has been closed or “charged off,” you still may want to pay the debt. Credit inquiries to your credit report will show that the debt has been paid. This may be favorable to you as you try to reestablish your credit and obtain a new loan.

‘Settling’ credit card debt

Debt settlement companies offer to negotiate with credit card companies to reduce the amount you have to pay to settle your debt. Some claim to be able to reduce the balance by as much as 30 percent to 70 percent. However, the credit card company is not obligated to accept the debt settlement offer. Also, if you stop paying your bills, late fees and interest charges will continue to accumulate. The debt settlement company will charge a fee for its services and set up an account for you to deposit money into to pay your creditors. One consideration to keep in mind: the IRS might want you to pay taxes on the money you save by settling your debt.


If you are struggling to find a solution to credit card debt, you may benefit from the services of a debt counseling expert. Qualified financial counselors can work with you to help you develop a budget and decide upon a plan of action to get out of debt, such as debt settlement, debt consolidation, or, as a last resort, personal bankruptcy.