A company or agency that tries to recover debt from you in place of your original creditors is a debt collection agency. They are hired by the companies you owe money to. Debt collectors are monitored by the Federal Trade Commission (FTC), which enforces the Fair Debt Collection Practices Act (FDCPA).
Once you’re in debt, the biggest hurdle is dealing and negotiating with the debt collector. Once, you’ve done that, the tricky part is to think about the mode of payment and the risk if your repayment is reaching your creditor at all. There are different mode of payments like bank account draft, personal check, debit card, prepaid card, credit card or money transfer by which you can pay the collector but the safety attached to paying your creditor via a collector is questionable.
Below are mentioned some pros of paying collectors through different modes:
Cheques: By paying through cheques you save a lot of money as it’s cheaper than any other mode of repayment. You will only have to pay for postage price and certified mail fees to get confirmation that the cheque was received.
Prepaid cards: By using prepaid cards you just have to load money into that account and use it to spend the money. You can spend only as much as you deposit in your prepaid card. So, it’s beneficial as you need not worry about overdraft charges in case the collector over-billed you. Hence, it’s a very safe mode of repayment.
Money orders: You can use money orders as they are of nominal charges and you can easily buy them at post office, grocery stores, bank or credit union, etc. You’ve to mail the money order, so while calculating charges for mailing you must add postage fees and proof of delivery too.
Paypal: Paypal is also a common method of transferring money to your debt collectors. By using paypal balance, you can send money without any fees. The amount that you transfer to the collector may have sending limit, you must check your account regarding this. If you’ve set up a payment plan, Paypal states that you can stop a preapproved payment anytime before 3 working days until it is scheduled to debit from your account.
Not all that shines is gold. You will surely have some side effects if solutions to financial problems come with shortcuts. The following are some cons of paying collectors through different modes:
Bank account draft: When you use bank account draft or auto debit, it means you’ve given permission to the collector to access the account whenever they wish to. This can create a lot of hassle which can either by accident or design.
Instalments: There is another hidden problem if you decide paying your debts through installments. In case your financial situation changes and there’s less money in your account than you can pay, you might be charged overdraft fees. This will only add up to your debts. You are already in the process of repaying your debts and now there can be a new debt to your financial institution for overdraft fees.
Debit card: Debit card is also an option of paying your collectors but the amount withdrawn from your account can go wrong or there can be more than one withdrawals, instead of what was agreed upon. It may be be difficult to prove that the amount drawn from your account was unapproved, since you have only provided the details of your debit card to the collector. So, it’s better to avoid using debit card as a mode of repayment to your collector.
Credit card: You can also pay your collector through a credit card but that will actually add to your debts, instead of decreasing them. You’ll have a new debt and additional finance charges.
Money transfer: You can also use money transfer as the mode of payment. It includes services like Western Union or MoneyGram, and wire transfers directly from your bank or credit union account to the collector’s account. It’s comfortable for debt collectors since they can get the payment quickly. Money transfers can be expensive and a risky mode of payment. If you are using money transfer be cautious about the kind of proof you will receive.
While paying a debt collector be sure that the collector is genuine, verify your debts and then only think about repayment and negotiation. You don’t have to take pressure from the collectors if they warn about garnishing your wages, they can’t do anything without filing a lawsuit. When you are ready for repayment and have negotiated with the creditor, make sure to write an agreement mentioning the agreed amount and get it signed by the person concerned.