If you are debating how to satisfy your credit card debt, the answer may revolve around your resources more than anything else. Your financial status can determine if you pay off debt or if you must settle credit card debt.

Identification

Paying a credit card balance in full is the act of satisfying your debt by paying the full amount you owe plus any service charges and interest. Settling your credit card debt happens when you are unable to pay your debt in full, and you negotiate a lower pay-off amount with the credit card company that will consider the debt paid in full.

Benefits

The only benefit to debt settlement is that you can attempt to get the credit card company to take as much as 50 percent of the balance you owe as a final settlement. If your account is severely delinquent, then according to CreditInfoCenter.com, the company may be willing to accept half of what they are owed just to get a payment to help offset their losses.

Potential

According to CBS News, if you hire a debt settlement firm to help you negotiate with the credit card company the fee could be as much as 15 percent of the total balance owed. You will also have a mark on your credit profile that will bring your credit score down.

Considerations

MSN Money suggests that rather than paying off all of your credit, start using some of your cards to help bolster your credit score. Charge only small amounts and pay the balance in full each month to avoid interest charges. Using your old cards every so often helps to keep your old credit active and can increase your credit rating.

Expert Insight

According to Liz Puliam Weston writing on MSN Money, if you can get your balance on your credit cards below 30 percent of the credit limit, then you are helping your credit score.

Source:

CreditInfoCenter.com: Debt Settlement Advice

CBS News: Debt Settlement Can Hurt More than Help

MSN Money: 7 Fast Fixes to Your Credit Score

Resource:

Motley Fool: 9 Ways to Pay Off Debt