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While making my monthly payments to the debt settlement, will my balances still be open on my credit cards that are part of the settlement, and thus have interests and fees accruing on them still?

Yes, you will still be accumulating interest and late fees on your cards during the debt settlement process. By “process” I mean the time during which you are making monthly payments into a trust account that will be used to eventually negotiate the settlement rather than paying your credit card bills like you normally would (or should). During this period your accounts go into default which is what results in the damaged credit score.

Note that the debt settlement is a negotiated amount between you and your creditor that will be agreed to once your trust account has accumulated sufficient funds as determined by your debt settlement company. This negotiated amount will include all the late fees, penalties, accrued interest, etc. that has accumulated. So yes, the fees will add up but once a settlement is reached, it will include everything that you owe and your account will be closed.

The only cost in addition to the settlement that you need to beware of is the tax bill from the IRS on the amount you “saved” as they view that as taxable income (crazy, I know). Your debt settlement company should make you aware of this upfront and help you save for the tax bill as well.