Credit-Card Debt Is Rising; Watch out for Repayment Traps

Credit-card debt is nearing an all-time high in the United States.

With an expensive holiday season, many families might be spending a bit more than they expected, which is why the Federal Trade Commission is warning about the promise of quick debt relief.

"Unfortunately the late-night commercials or ads that you see that sound too good to be true are actually too good to be true," said Felipe Arévalo of the San Diego Financial Literacy Center.

The FTC shut down what it called a debt relief scheme at the end of November. In its complaint, the commission said people already struggling under their debt lost millions of dollars, mostly across the southwestern U.S.

"Often the companies that are offering to completely eliminate your debt are the ones you gotta be a little more cautious with," said Arévalo.

So how do you protect yourself?

• Do an internet search: Specifically, type in the company name, followed by the word "scam" or "fraud"
• Listen cautiously: The FTC says many illegitimate companies tell you to stop making payments and stop talking to your credit-card company. Unfortunately, that could mean you'll be hit with more fees and charges
• Don't pay in advance: If you choose a debt-consolidation company, the FTC said, it's illegal for the company to charge you a fee before the job is done.

Overall, be careful about what a company is promising.

"Some may say they'll help you pay down your debt faster, not necessarily completely erase it," Arévalo said.

You can also look for local credit counselors. Often they can help you come up with a payment plan that works for you.

And if you're not sure where to start, Arévalo said, you can call the customer service number on the back of your credit card to see what repayment plans it has available.

"It's important to remember: Not every debt-relief program is going to be a good fit for everyone," Arévalo said.