There are some companies out there that just know how to effectively market to folks in the middle of financial difficulties. Payday loan businesses are really good at this. In the case of payday loans, the fact that these lenders offer a service that traditional financial institutions tend to ignore – short term low value loans – doesn’t hurt either.

If you’ve been listening to radio ads lately or turned on your television for more than five minutes, chances are pretty good you’ve seen or heard an ad about how you can “settle your credit card debt for pennies on the dollar.” Some of these ads are pretty slick and possibly even intentionally misleading. They talk about the President’s “stimulus plan” that helps you to reduce credit card debt, and about “secrets” that “they” don’t want you to know.

(And, of course, anytime someone claims to have a secret that “they” don’t want you to know, watch out. They’re probably selling something, and it’s often a scam.)

The thing is that there is no magic fairy out there that’s just going to wave her wand and erase your credit card debt. It’s never as easy as it sounds, even if it is based on one small kernel of truth.

What is that kernel of truth? The fact is that, in some cases, you can settle credit card debt for less than what it’s worth. This practice is known as “debt settlement,” and it isn’t a secret formula or a magic bullet that you need to hire someone else to handle.

Credit card companies will sometimes accept as little as half the debt you owe. The thing is that you need to be able to pay them that amount in one lump sum. The chances are pretty good that, if you have that much in a lump sum, you wouldn’t be struggling with your credit card bills to begin with.

So, how do these debt settlement companies work? Usually, they have you put money into a bank account or a trust account. When the balance gets big enough, they contact the credit card company and make an offer of a lump sum.

Is this something you can do on your own at home? Of course it is. Is it a service that you need to pay someone for? Not usually. There really is little advantage to using this kind of a service except for the fact that the money you set aside into the bank account or trust account is kept out of your own reach, where you can’t get to it and spend it.…