Can I Use a Credit Card While on a DMP?

If you’re ready to become debt-free, then a debt management plan (DMP), which provides one monthly payment, lower interest rates and ongoing support from certified financial counselors, might be the perfect solution. But before you take the leap, there are a few things you’ll need to understand, like the fact that you probably won’t be able to use a credit card during the duration of the program.

You’re required to close your accounts

Any credit card that is included in your DMP is required to be closed. Here’s how it works — the creditor, which is typically a bank or other financial institution, works with MMI to create a DMP, which usually includes reduced interest rates on your credit card accounts. Lower interest rates are a win-win for you and the creditor because the lower rates make it easier for you to pay your balance, and as a result, ensures that the creditor gets paid. But one of the creditors’ conditions for offering a lower interest rate is that you close the credit card. This ensures that you use the lower rate is used for its intended purpose: debt freedom.

Keep in mind - the agency administering your debt management plan will not (and cannot) close your credit cards. If you don't close the accounts on your own, your creditor will once the account has been accepted onto the DMP.

Creditors monitor your spending activity

There’s a chance you’ll have a credit card that isn’t included in your DMP. Perhaps you have a credit card with no balance or you keep one for emergencies. If that’s the case, you might not be required to close the account, but it’s probably not a good idea to use that card either. This is because the creditors who are involved in your DMP can monitor all of your spending and if they notice that you are accruing more debt, they might ask you to close the account.

Credit cards make it harder to accomplish your goal

For many people, a debt management program is a way to regain control of their finances and build a stronger financial future. The goal of the program is simple: no more debt. Using a credit card while you’re on a DMP makes it harder to accomplish that goal. While you’re on a DMP, cash is king.

That said, depending on the circumstances you may be allowed to keep an emergency credit card (not included on your DMP) open in case of emergencies. Just ask your credit counselor when discussing your plan. 

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.