Your Guide to Credit Card Relief

Everything from eggs to car insurance is more expensive right now, so more people are relying on credit cards to cover their bills. As a result, more people are carrying balances, and the average balance is higher. As of 2024, the average credit card balance was approximately $6,700, about 5% higher than the average balance in 2023. 

If you’re struggling to get a handle on your debt, credit card debt relief programs may be a solution. Here is how these programs work, and who could benefit from them. 

What is debt relief?

Debt relief or debt settlement involves renegotiating or settling your outstanding balances. 

Credit card debt relief companies work to slash your balances, convincing your creditors to settle the debt for a fraction of what you owe. If successful, you could potentially be out of debt in 24 to 48 months. 

While it is possible to negotiate a credit card settlement on your own, debt settlement companies are experienced, with specially-trained debt specialists. As a result, they may be more successful at negotiating a settlement than an individual advocating on their own behalf. 

How credit card debt relief works

The credit card debt relief process can take some time to complete. To get started, follow these steps: 

1. Meet with a debt relief specialist: Typically, you’ll talk to a debt specialist over the phone. The specialist will discuss your debt, goals and what options may be available to you. They’ll also explain what fees are involved.
2. Make one monthly payment: If you decide that a debt relief plan is right for you, the specialist will work with you to create a separate savings account. Each month, you’ll pay a fixed amount to the account — this is the money that will be used to pay for the settlement.
3. Wait for a settlement offer: As your account balance grows, the debt relief specialist will negotiate with your creditors on your behalf. As settlement offers come in, the specialist will send you updates.
4. Pay off the settlement amount: If you approve the settlement amount, payments will go directly to your creditors from your settlement-specific account. Once the debt is settled, it’s done — you no longer have to worry about that account.

Pros and cons of debt relief programs

Pros

• You may get out of debt faster: Depending on the debt you have, credit card debt relief may be faster than paying it off on your own. You could be out of debt in two to four years.
• You may save money: If the credit card debt relief company is successful in negotiating a settlement, you could slash what you have to pay your creditors.
• You simplify your payments: With debt settlements, you make one simple monthly payment to your settlement account, simplifying your finances.

Cons

• There is no guarantee of success: Not all creditors will agree to work with a debt relief company, so there’s no guarantee the company will be successful in negotiating a settlement.
• The fees can be significant: Fees vary by company, but they can be anywhere from 15% to 25% of your enrolled debt, cutting into your savings.
• Your credit may be damaged: Settling a debt will show up on your credit report, and it stays on your credit report for years, damaging your credit. That’s why debt settlement is usually best for those who have already missed payments and can’t afford their debt; it’s an option to explore before more extreme avenues like bankruptcy.

Alternatives to credit card debt relief

Although debt relief can be a useful tool for borrowers who feel like they’re struggling with credit card debt, it’s not a good fit for everyone. Depending on your circumstances, one of the following options may be a better path forward:

Credit card rate negotiation

If your debt is at a manageable level but you want to reduce interest charges, directly negotiating with creditors to secure a lower rate may be possible. Contact your credit card company and discuss your options. 

It may be helpful to research other credit cards. If you never missed a credit card payment and have good credit, you may qualify for lower-rate cards, which can help you negotiate with your current credit card issuer. 

DIY debt repayment

Depending on how much debt you have and your overall financial health, you may be able to pay off your credit card debt on your own. 

One popular strategy is the debt snowball method. Under this approach, you list all of your outstanding debt accounts, ordering them from the smallest balance to the highest. 

You make all of the required minimum payments, but you put any extra money you have toward the debt with the smallest balance. 

Once the lowest balance is paid off, you take the money you were paying toward that account and add it to the payment you make toward the next-lowest balance, and you continue this process until your debt is repaid in full. 

A DIY approach is useful for those who may have racked up debt due to overspending; if you can afford to cut your spending or if you can increase your income, this approach can be effective. 

Balance transfer

If you have good credit and a relatively small amount of debt, a balance transfer may be a viable alternative to debt settlement. 

With a balance transfer, you move your credit card debt from one card to another one with a promotional annual percentage rate (APR), such as 0% APR for 12 months. These offers give you time to pay down your balance without interest. Once the promotional period ends, the card’s regular APR will apply.

Balance transfers are best for those who have good credit and who can afford to pay off the debt in full by the end of the promotional period. 

Debt consolidation

Similar to balance transfers, debt consolidation is a way to streamline your debt and reduce the amount of interest you pay. 

With debt consolidation, you take out a personal loan for the amount of your outstanding debt, and use it to pay off your balances. Personal loans typically have lower rates than credit cards, so you can save money, and you can choose a loan term of two to seven years. 

For a debt consolidation loan to make sense, you usually need good credit so you qualify for competitive rates. Many lenders cap their loan maximums at $50,000 or less, so this approach tends to be for borrowers with less than that in debt. 

Credit counseling

Many people have trouble with managing their money, creating a budget, and paying down debt. If that sounds like you, you may benefit from credit counseling.

Credit counseling is available through non-profit credit counseling organizations. During your sessions, the counselor will review your finances, help you develop a budget, and identify ways to cut your spending. If you have credit card debt or other unsecured debt, they can also help you create a debt repayment plan. 

You can find a non-profit credit counseling agency near you through NFCC.org.

Credit card debt relief FAQs

How much does debt relief cost?

Fees vary by debt relief provider. Generally, fees range from 15% to 25% of the amount of enrolled debt. By law, debt relief companies cannot collect any fee from you until they settle your debt. 

How do I find a reputable debt relief company?

The American Association for Debt Resolution maintains a list of accredited debt relief or debt settlement companies. You can use its platform to search for debt relief companies near you. 

What types of debt qualify for debt relief?

The only type of debt that qualifies for debt relief is unsecured debt. The most common type of unsecured debt — and the most common debt applicable for debt relief — is credit card debt. 

This story was originally published April 4, 2025 at 8:30 AM.