Credit Card Debt Relief: How You Can Get Out of Debt
8 MIN READ
Published March 28, 2023 | Updated October 04, 2023
As inflation remains high, more Americans than ever before are relying on credit cards to get by. Due to unemployment, many have to rely on their credit cards to cover necessary expenses and bills. Even when income recovers, it can be challenging to pay off the balances because of the high-interest rates.
This is where credit card debt relief can help you regain stability and become debt-free.
You are not alone in facing insurmountable credit card debt:
- Compared to $771 billion in 2021, credit card balances in 2022 increased to $986 billion in the U.S.
- 2022 Q4 marked the highest-ever quarterly growth ever on record.
- More than 18 million people were behind on their credit card payments in 2022.
If you are facing financial hardship, there are a number of debt relief options available through nonprofit and for-profit companies to manage your credit card debt.
It is important to understand which options are legit, how to avoid scams, and how they work. TurboDebt can help you find the best debt relief option for your personal financial circumstances.
What is Credit Card Debt Relief?
Credit card debt relief is any strategy that lowers your burden of debt and makes repayment easier.
When you are dealing with crushing credit card debt, anything that can help you manage the debt can be a relief.
Your personalized credit card debt relief plan can be one or a combination of the strategies below:
- Restructure your credit card balance amounts
- Combine multiple credit cards into a single, more manageable payment
- Negotiate with your credit card issuer to lower the amount of your debt
- Pay off your principal faster
- Find a low-interest credit card or loan to pay off high-interest debt
TurboDebt can guide you so that you can find what program will work the best for you and create the breathing room you need.
When to Look for Credit Card Debt Relief
A good time to look for credit card relief is when you are behind on your credit card bills, find your debt overwhelming, or are struggling to make payments to your lender on time.
In 2021, the average American had over $5,525 in credit card debt. It is the second largest source of debt in the U.S. after mortgage debt.
Those living in states with the highest cost of living, such as Alaska, Hawaii, and Connecticut, have the highest credit card balances and are especially affected.
It comes as no surprise that 7 in 10 Americans believe that reducing their debt is important for improving their well-being. But there is no need to despair because there is a way out of this oppressive cycle of debt and borrowing.
Other than creating a plan to pay off your debt, you can also work with a professional counselor to address the spending habits that keep you in debt.
How is Your Credit Score Affected by Credit Card Debt Relief?
Debt relief options will impact your credit scores differently depending on a number of factors, such as the option you choose and what your current credit scores are.
- Options like credit counseling and debt management plans will have no or minimal impact on your credit scores. They may even help you improve your credit score if you make timely payments and stick to the program.
- Options like credit card debt settlement may be reflected on your credit report. This option is usually used when you are already maxed out on your credit cards, or are feeling stuck making your minimum payments. Your credit scores may already be low, usually around 650, meaning you are generally not lendable, and not credit worthy.
You can request a free credit report to keep track of your current score.
It is always possible to turn over a new leaf, regardless of your current circumstances. TurboDebt can help you find a debt relief option that meets all your requirements.
Choosing the Best Credit Card Debt Relief Company
There are many debt relief companies out there today that can help you, so it’s important to take a look at their online reviews, accreditations, and ensure that they can deliver on their promises.
When choosing a company to work with, it is crucial to be aware of any solution that can negatively impact your credit score.
There are some warning signs that you may not be dealing with a legit debt relief company. The Federal Trade Commission points out these red flags:
- Offering guarantees that your debt will disappear
- Claims to settle all debts and will stop collection calls from credit card companies
- Charging upfront fees even before they provide any services
Look into the reviews of the company and see if any complaints have been registered against it before you decide to sign up for any program.
3 Proven Credit Card Debt Relief Programs
Regardless of your circumstances, there are several tried-and-true debt relief options designed specifically to help you manage your credit card debt.
Credit Card Balance Transfer
Balance transfer allows you to pay back all your credit card balances while minimizing your interest charges. This means you may be able to lower your monthly payments, save money, and pay off your debt faster.
Signing up for a 0% APR credit card balance transfer is an ideal solution if you have good credit. If you have an excellent credit score, you may even qualify for the longest 0% APR introductory period.
Many cards have promotions that run for up to 24 months, so you will have more time to pay off your credit card debt interest-free.
This is how it works:
- Open a balance transfer credit card. Your credit score will determine your credit limit, the terms and rates you qualify for.
- Transfer balances from all your existing credit cards to your new account. Transfer fees will be added.
- Pay off your debt without interest charges in the specified number of months.
If you want to enjoy the most cost savings, it is important to ensure you eliminate your entire balance during the term, so you do not incur any interest charges.
Low-Interest Debt Consolidation Loan
Another option is to consolidate your credit card debt with a personal loan that offers lower interest rates compared to your credit cards.
Like balance transfer, this option is only suitable for those who have a good or excellent credit history. Higher credit scores will allow you to qualify for lower interest rates. Aim to find any loan offering APR below 10% to get the relief you need.
Here is how it works:
- Compare the rates offered by different financial institutions to find one that is the most cost-effective.
- Apply for the loan and wait for the approval.
- Once the loan is approved, you can use the funds to pay off your total debt.
- Make regular payments towards your personal loan.
When using a debt consolidation personal loan, it is important to choose one that offers a shorter term to keep your total repayment costs lower.
Credit Card Debt Settlement
If your credit score is not ideal, or you need more monthly financial relief, debt settlement may be a good option for you. A professional debt relief company can negotiate with your credit card issuer to settle your debt for a lower lump sum amount.
A debt settlement program can help you successfully reduce your debt so you can avoid getting into dire situations like bankruptcy.
Many debt relief companies may also be able to negotiate for lower interest rates, lower penalties, lower fees, fixed payment schedules, or lower minimum payments.
According to the American Fair Credit Council, a debt settlement company can help you save $2.64 for every $1 you pay in fees. You may also be able to save up to 50% of your original debt before fees, so it can make a major impact on your financial well-being.
Alternatives to Credit Card Debt Relief Programs
If the options listed above do not seem feasible, there are several alternatives available to explore. The important thing to remember is that there is always a solution available, regardless of how dire the situation may seem to be.
Credit Card Debt Management Program
If you feel you are not making any progress in paying off your unsecured debt, it may be time for professional help. In many cases, credit card issuers may be hesitant to work with you if you have missed payments or do not have good credit.
Working with a professional credit counselor means there will be someone advocating for you. They can review all your options and help you choose a program that is right for your financial situation.
Once it is determined that a debt management program is suitable, you can enroll in the program. They will craft a repayment plan and a monthly payment structure that is sustainable for your budget. They will also negotiate with creditors to eliminate or reduce fees, interest charges, and penalties.
You can also find a credit counselor through the National Foundation of Credit Counseling.
Bankruptcy will have a severe impact on your credit, and this will last for several years. It is important to explore all the options available to you before you consider bankruptcy.
Depending on your circumstances, you can file for Chapter 7 or Chapter 13. It is also important to understand that bankruptcy is a legal process that will carry an additional cost in the form of attorney fees.
Bankruptcy does not always discharge all of your debt. Ultimately, this decision will be made by the court.
If you are overwhelmed with credit card debt and not sure which option will provide you with the most relief, it is time to talk to a professional.
A reputed debt relief agency can help you understand your options, find a debt resolution program that is suitable and help you develop a payment plan to pay off your debt.
TurboDebt offers advising, consultation, and planning services to help create credit card debt relief and repayment plans. We provide multiple debt management options so you can achieve your financial goals. Connect with our knowledgeable debt relief professionals for a free consultation today.