Key Takeaways

If you are facing financial hardship, it is recommended you contact your lender directly to see if you can work out a solution with them directly for temporary setbacks. If that doesn’t work, there are several credit card debt relief programs, such as credit card balance transfer, consolidation loans, and debt settlement, to choose from to help you pay off your debt faster.

Debt is something many Americans are familiar with. Credit card debt is one of the most expensive and challenging types of debt to deal with. The total credit card balance of Americans was $986 in Q1 2023. Although getting out of the debt cycle can feel like a daunting task, there are options available.

High balances, high-interest rates, and other factors can turn your credit card debt into a source of stress. If you’re finding it challenging to keep up with payments each month, you have many options, but you’ll want to weigh them carefully to find a program that suits your needs.

When Should You Consider a Credit Card Debt Relief Program?

You should consider credit card debt relief if:

  • You are feeling overwhelmed by the amount of debt you have.
  • You are receiving collection calls from debt collectors.
  • Your credit card debt makes it challenging to pay other bills.
  • You are at risk of defaulting.
  • You have maxed out all your credit cards and are having trouble making minimum payments.

Overall, Americans had unpaid balances of an average of $7,279 on their credit cards in December 2022. Those residing in Connecticut, New York, New Jersey, and Rhode Island are the most affected by credit card debt. If you are among those who are impacted, reducing your debt can improve your well-being and reduce your stress levels.

Talk to Your Credit Card Issuer First

When you are struggling to pay, your first line of action should be to talk to your lender. Credit card companies want to recover their money, so they may be likely to work out a deal with you. Call your lender and discuss your situation. Many companies have programs for borrowers facing financial hardship. They may be able to lower your interest rates temporarily, waive fees, and offer payment plans. These are short-term arrangements that may help you to recover your finances.

4 Debt Relief Options for Credit Card Debt

There are several options available to help you get out of credit card debt and make your payments more manageable. You’ll have to compare your options and decide which one may be the best for your situation.

1. Credit Card Balance Transfer

Transferring your credit card balance from a card with a higher interest rate to one that offers you a low-interest rate is an option to consider. If you have excellent credit, you may qualify for a balance transfer card, which can help you pay off your debt faster. Credit card consolidation through a balance transfer card is especially helpful when you have balances across multiple cards.

Although balance transfer credit cards won’t reduce the amount of debt you have, they can help you consolidate multiple balances into one to simplify repayment. It is important to remember that there are a few risks involved. You’ll need to pay a balance transfer fee which is usually charged as a percentage of the amount you transfer. The promotional rate of 0% lasts for a limited time. To get the most out of this option, you should be able to pay off your entire balance before the end of the promotional rate.

2. Credit Card Consolidation Loan

Another viable method to reduce what you’ll pay towards interest is through a credit card debt consolidation loan. If you qualify, you may be able to take out a personal loan with a lower interest rate. You can use those funds to pay off your debt and close your credit card account. You’ll then have a fixed payment schedule with a single payment each month. While this won’t reduce your total debt, it will allow you to save a considerable amount of money on interest charges.  

3. Debt Management Plans

Nonprofit credit counseling agencies can enroll you in a debt management plan. These plans are designed to help you pay off your credit card debt with a repayment plan over a set period. Credit counselors may also be able to negotiate with your lenders to lower interest rates or waive fees.

With a debt management program, you’ll be making a single payment each month to the agency. The credit counseling agency will then distribute it to your creditors. It is important to know that when you are enrolled in these programs, you may have to close your existing lines of credit.

4. Credit Card Debt Settlement

If your credit score is not ideal, or when you need more financial relief from overwhelming credit card debt, debt settlement may be a good option for you. With debt settlement, you can negotiate with your credit card lender to settle your account for a lumpsum amount that is lower than what you currently owe.

debt relief company can negotiate on your behalf to reach an acceptable settlement amount for both parties. A credit card debt settlement program is a good solution when you have a lot of debt, are finding it difficult to pay credit card bills, are receiving debt collection calls, and have no way to clear your full balance. It can help you avoid dire financial situations like bankruptcy. You may be able to save up to 50% of your debt before fees, which can have a major impact on your financial well-being.  

Credit Card Debt Forgiveness Programs

Credit card debt forgiveness is a rare but possible solution as an alternative to the debt relief options discussed above. Credit card debt forgiveness is when a lender forgives a portion of your debt. It is rare for financial institutions to forgive your entire debt, but if they feel that they won’t be able to recover the full amount you owe, they may be willing to accept a lump sum amount and forgive the rest. This is usually done when you have missed a lot of payments or have not been able to pay the minimum monthly payments.

For example, if you have $8,000 in credit card debt and you are six months behind on your payments. Your credit card company may be willing to negotiate with you and accept a lump sum of $5,000. The remaining $3,000 is forgiven. The federal government does not have any credit card debt forgiveness programs.   

Credit Card Debt Relief Programs to Avoid

An effective credit card debt relief program will improve your position, not worsen it. The debt solutions discussed above, when used correctly, may be able to provide you with the relief you need and are a path to a debt-free life.

There are other solutions available, but these should be avoided:

  • Using a home equity loan to clear your credit card debt. This puts you at risk of foreclosure if you miss monthly payments.
  • Tapping into your IRA or 401(k). This option may drain the funds in your savings that you’ll need to retire later in life. You may also have to pay early withdrawal penalties.
  • Taking out payday loans. These are short-term loans with incredibly high-interest rates of 400% or more. They’ll only make your debt worse.

How Debt Relief Programs Can Impact Your Credit

The biggest concern that borrowers have when they are looking for a debt resolution program is how it will affect their credit. It is important to remember that any debt relief program you choose will likely have some negative impact on your credit score. Some programs will impact your credit more than others. For example, debt consolidation will have a minimal impact on your credit if you make payments regularly. Options like bankruptcy will have a lasting impact.

Although this may lead you to believe that you shouldn’t get help, it is important to know that not doing anything can have an even bigger impact on your credit report. Missing payments on your credit cards is one of the worst things you can do for your credit history. When compared to defaulting, getting professional debt relief may be a better option.

Choosing the Best Credit Card Debt Relief Program

Everyone’s financial situation is different. Choosing the best credit card debt relief program will depend on a number of factors, such as:

  • The amount of money you owe.
  • Other obligations you currently have.
  • Your budget.
  • Your credit score.  

Debt Consolidation: If you are in a relatively stable financial position and have good credit, debt consolidation may be an ideal solution for you. If you have a reliable source of income to make payments towards your consolidation loan, debt consolidation is usually a suitable option. 

Debt Settlement: If you are already behind on your credit card payments, are unable to make minimum payments, have late fees, and have a lot of debt to deal with, debt settlement may be the right option for you. However, you’ll need to put aside some savings to make the lump sum payment to settle your account. 

Bankruptcy: If you feel like you have too much debt and no way of paying it back, contact a bankruptcy attorney to determine if filing for bankruptcy vs. debt settlement or even a consolidation loan may be a better option to get relief from unsecured debts.

Choose a reliable credit card debt relief program from a professional debt relief company. Before you hire them, make sure you understand the services they offer, their reviews, and the fees involved. The company you work with should be transparent about its process and pricing. Avoid any company that asks for payment upfront before providing you with any services.

TurboDebt can help you get out of the cycle of credit card debt through advising, planning, and debt relief services. Our debt professionals can help you find the right debt relief option based on your financial situation. Connect with us today for a free consultation. Read our reviews to see how our debt relief services have helped thousands of clients.