Should You Lump Credit Card Debt Together?

Founded in 1951, this organization imposes stringent accreditation guidelines and a certification process for credit counselors. Many NFCC-accredited agencies rely on the United Way or government grants for part of their funding. At these agencies — the largest of which is the Consumer Credit Counseling Service — consumers can meet with counselors face-to-face, arrange for long-term budget guidance and establish debt management plans, all for a nominal or no fee.

Many of the newer debt consolidation agencies that Hobson classifies as "not so good," conduct most of their business by phone or fax. These organizations rely heavily on advertising, particularly through the telephone, the Internet and infomercials.

Though they have attracted thousands of clients, they have also been subject to numerous complaints about their fees, often equivalent to one month's worth of payments. Many consumers are unaware that their first payment goes to the consolidator and not to their creditors. This confusion often results in late payments that can damage people's credit ratings.

Hobson said her biggest piece of advice for those who are digging out of debt is to cut up their credit cards, with the exception of one that can be used for emergencies.

Mellody Hobson, president of Ariel Capital Management in Chicago, is GoodMorning America's personal finance expert. Click here to visit her Web site, Ariel Mutual Ariel associate Matthew Yale contributed to this report.

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