Credit card debt relief: How to get it and what to know

Written by: Evelyn Pimplaskar
• Updated •7 min read
Woman sitting on sofa, wondering about credit card debt reliefImage: Woman sitting on sofa, wondering about credit card debt relief

In a Nutshell

Looking for credit card debt relief? There are a number of ways to manage your credit card debt when you’re facing financial hardship. But some options can negatively affect your credit, and others may be scams — so it’s important to understand which options are legit and how they work.
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Credit card debt is a financial burden for many Americans.

In fact, Credit Karma member data pulled on Jan. 4, 2024, reveals that members with at least one credit card carry an average of $7,288 in card debt, with some generations and geographic groups holding much higher average debt (see Methodology).

Many factors could turn your credit cards into a source of financial stress, including economic conditions, high interest rates and high balances carried from month to month. If you’re struggling to keep up with the monthly payments on your credit cards, you may have options for credit card debt relief — but you’ll want to beware of third-party debt settlement programs that might try to scam you.

What is credit card debt relief?

If you’re dealing with a crushing credit card balance, you may consider anything that helps you manage that debt to be a relief. And it’s true there are many ways to alleviate your debt.

Credit card debt relief can come in many forms. And there isn’t a one-size-fits-all approach. It can involve something you do on your own, such as using a lower-interest personal loan or credit card to pay off high-interest credit card debt. While this will not eliminate the amount you owe, it may help you to pay off more of your principal balance faster. Relief could also come from a formal negotiation between you and your credit card issuer that actually lowers the amount of debt you need to pay back.

How to manage credit card debt

Should I seek credit card debt relief?

Anyone struggling to pay off their debt can look into credit card debt relief options to find one that may help their particular situation. Credit card debt relief may be worth pursuing in these situations.

  • Your credit card debt is making it difficult to pay other bills.
  • You’re receiving collection notices.
  • You’re feeling overwhelmed by your debt and overall financial situation.

What kinds of credit card debt relief are available?

There are a few options available to help you make your credit card debt more manageable. You’ll have to do some research to decide which is the best move for your situation, but each of the following paths may be worth a look.

Credit card balance transfer

Transferring debt from a credit card with a high interest rate to one with a lower interest rate is one step you can take on your own. If you qualify for a balance transfer card, you may be able to secure a lower interest rate, which could help you pay down the debt principal faster.

While this tactic won’t relieve you of the amount of debt you owe, a balance transfer can also allow you to consolidate multiple credit card balances into one — essentially repackaging your debt and simplifying your bills.

But be aware that balance transfers can be complicated and come with plenty of risks. You may also have to pay a balance transfer fee — usually a percentage of the amount being transferred — and low promotional interest rates (typically 0%) only last a limited time. To get the most benefit from your balance transfer, you’ll want to pay off as much of the debt as possible before the promotional rate ends and the APR increases.

Learn more about balance transfers.

Consolidate with a personal loan

Another way to possibly reduce the amount of ongoing interest payments on your credit card debt is to consolidate your debt into a lower-interest personal loan. After taking out a personal loan that has a lower interest rate than your credit cards, you can use the loan to pay off your credit card debt — giving you a chance to pay it down faster with one simplified monthly payment.

As with credit card balance transfers, consolidating credit card debt into a personal loan won’t reduce the amount you owe, but may boost your effort to get the debt under control.

Learn about consolidating credit card debt.

Debt management plans

Nonprofit credit counselors generally can help you set up a debt management program, also called a debt management plan. Typically, debt management plans should help you pay off your debt in full over a set period of time. Your credit counselor may negotiate directly with your creditors on your behalf, and creditors may agree to waive fees or lower your interest rate.

When you have a debt management plan, it may involve making one lump payment every month to the nonprofit, which then sends the money directly to your creditors.

Learn more about debt management plans.

Negotiating a debt settlement program

Debt settlement basically means negotiating with a creditor — in this case, your credit card issuer — to accept a lump sum payment that’s less than the amount you owe. There are two ways to negotiate a debt settlement: on your own working directly with the creditor or with the assistance of a third-party (and usually for-profit) debt settlement company.

Debt settlement programs may help you reduce the amount of your debt and avoid getting into more dire financial straits, like bankruptcy. Some credit card issuers may offer other relief such as a lower interest rate, a smaller minimum payment, lower fees and penalties, or a fixed payment schedule.

But these companies may encourage you to stop making payments on your debt before reaching an agreement with your creditor. If that’s the case, your credit can be negatively affected, so think carefully before entering into any agreement.

Learn more about debt settlement.

Beware of debt relief scams

Debt settlement through a third party is already full of risks that could affect your credit scores or even leave you owing more. Some companies that claim they’ll help you settle debt are nothing more than scammers that promise more than they might be able to deliver.

The Federal Trade Commission points to some warning signs that a debt relief company may not be legit. Watch out if the company does the following:

  • Guarantees it’ll make your credit card debt disappear
  • Charges fees before settling your debt
  • Claims it can get you into a new government program for people with credit card debt
  • Fails to explain the consequences of halting payments and communications with your creditors
  • Pledges to stop all collection calls and legal actions
  • Guarantees it can settle your credit card debt for pennies on the dollar

Bankruptcy: The last resort option

Bankruptcy’s effect on your credit is severe and can last for many years, so it’s critical to explore and exhaust all other options before considering bankruptcy. If you decide to pursue bankruptcy, the two kinds most commonly used for individuals are Chapter 7 and Chapter 13. Your circumstances will determine which type you should file.

Take note: Bankruptcy doesn’t necessarily discharge all your debt. Certain forms of debt, like student loans, can be very difficult to discharge, and the bankruptcy courts will ultimately decide how much of your debt gets eliminated.

Learn more about bankruptcy.

What are potential pitfalls of credit card debt relief?

While the prospect of getting relief from high credit card debt can be appealing, some solutions come with potential drawbacks.

  • Debt settlement and bankruptcy can affect your credit. While these efforts can help manage your debt payments, they can also affect your credit for several years. Not having repaid your credit according to the original terms of your credit agreement can stand out to potential lenders, so think about long-term consequences when seeking short-term relief. Plus, if your debt settlement company advises you to stop paying your creditors directly, you could be subject to additional interest charges and late fees. (Debt consolidation can also affect credit scores, though the impact typically is more minor and more temporary.)
  • Credit card debt relief may cost you money. If you take out a personal loan or a balance transfer card to pay off credit card debt, you’ll likely face fees and interest. Similarly, declaring bankruptcy could mean you need to pay court costs, and even nonprofit organizations and credit counselors generally charge for their services.
  • Discharged or reduced debt can affect your federal income taxes. If you have your credit card debt forgiven, the IRS will likely view your canceled debt as income and tax accordingly.

Next steps: Find the relief that’s right for you

If you’re struggling with credit card debt and aren’t sure what tactic will bring you the most relief, it’s worth considering talking to a nonprofit credit counselor. A reputable credit counseling organization may be able to help you understand your options and develop a plan to manage your finances and pay off debt.

The FTC offers some guidance on how to choose a reputable credit counselor, and the U.S. Department of Justice provides a searchable list of approved credit counseling agencies.

If you find a debt relief plan that’s right for you, it’s important to make any payments associated with your debt relief plan on time. Paying down credit card debt can be difficult, but with the right information and some help, you can take on the challenge and succeed.

Methodology

To determine averages across credit card debt, we analyzed the accounts of more than 85 million U.S. Credit Karma members. All aggregate data analyzed was pulled on Jan. 4, 2024. The data came from members’ TransUnion credit reports, and the averages were based on information from the last 90 days. For the purposes of this analysis, credit card debt is defined as any unpaid balance existing on members’ open credit cards in aggregate at the time the data was pulled. All numbers in this report were rounded to the nearest whole.

About the author: With nearly 30 years of experience in media, marketing, public relations and journalism, Evelyn’s written about nearly everything — from newspaper accounts of salacious capital murder trials to whitepapers on what typ… Read more.