My Dumbest Purchase Ever... Debt Reduction Scam

Debt Kid is asking readers to share stories of their dumbest purchase ever. Go leave a comment or a trackback from your blog to win his dumbest purchase ever... a DS Lite.

Honestly, its about time I got this off of my chest. It was so dumb that I pushed it out of my mind until I read Debt Kid's post. My dumbest purchase ever: I got sucked into a debt reduction scam during my sophomore year of college.

At that time I has maybe $3000 in credit card debt. By then I had put at least four semesters of books, a pair of glasses, dentist bills, and groceries on credit. I only worked about 10-15 hours a week while going to school full time. Even at $12/hour, that was barely enough to pay my rent and bills. I paid more than the minimum every month, but I just couldn't get ahead. My rent alone was about $500/month so that I could live within walking distance to campus. My phone bill was something like $60/month. I didn't need a car, but once you added in utilities and groceries, I was spending more than I was making.

I knew this was a death trap, but I just didn't see a way out. Both of my parents were laid off at the time, so I definitely couldn't ask them for help. In fact, that made me want to get out of debt more so because I knew they had very little saved up. What if they needed my help?

I got very depressed for a while, then finally started searching for help. I was embarrassed about the whole situation so I went online rather than talking to friends. I made a few calls to various debt consolidation and counseling companies. This company stuck out to me because they weren't trying to get me to take more out. They were going to work with me to make the debt I had more manageable.

They claimed to have ties with the major credit card companies. They could drastically reduce my interest rates and minimum payments. They printed out a few graphs of how much money I'd save over time - they guaranteed this - and they promised to be available to give me advice. In the end I ended up paying them $400 for their service. It made sense at the time because they guaranteed to save me thousands or they'd refund the fee. They made a few calls to my credit card companies asking them to reduce my rates. No luck. All of the sudden the company was gone. No one answered my calls and eventually the number was changed.

I really needed help and they scammed me. Not only did I pay for what I could have done myself, but it got me even deeper in debt. Plus it killed my motivation and morale. Things got a lot worse for me, financially and emotionally, before they got better. I'm almost in tears just thinking about it. If even one person benefits from this website I really feel like I have made a huge impact. If you're reading blogs like this, you are already better off than I was. Good for you :) Getting out just takes time and a positive attitude. If you ever feel stuck, ask for help from someone you can trust. There is plenty of free advice out there, don't risk being scammed.

Update: I ran across a pretty good list of tips for dealing with debt management counseling over at Wisebread. Definitely worth taking a look at if your considering it.