Credit Card Debt Relief (2024)

Step 1: Credit counseling

Credit counseling is not a debt solution in and of itself. It’s an easy, free way to find the debt solution you need. A certified credit counselor evaluates your debts, credit and budget to see where you stand so they can help you find the right solution for your needs.

Step 2: Weigh your options for debt relief

The credit counselor’s job is to provide all the information you need to make an informed decision to get out of debt. The counselor can help you understand how adebt management planthrough a credit counseling agency will work. They will also explain how this solution differs from others, like debt consolidation, debt settlement, and bankruptcy.

Once they answer all your questions, you may decide to explore other options before you choose a solution. As you research other options, these free resources can help you zero in on the best solution for your needs.

• Explore all your options for debt consolidation »
• Compare consolidation to other solutions »
• See debt relief in action for other credit users in your state »

Step 3: Enroll in a debt management program as soon as you’re ready

If you decide a debt management program is your best option, then you can enroll as soon as you’re ready. Then our team will go to work. We call each of your creditors to work out three key factors that will make it easier for you to get out of debt:

1. That they agree to accept payments through a debt management program
2. To reduce or eliminate interest charges applied to your credit
3. That they will stop tacking on penalties and fees to your debt

Once all your creditors sign off, you start the program. You make one payment to us each month, then we distribute it to your creditors on your behalf. Here’s what you can expect from a debt management program:

Specialized help for military Service Members and Veterans

If you are currently serving or have served in the military, then you face a unique set of financial challenges. Consolidated Credit works closely with Southern Command, Army OneSource and the Department of Defense to help military Service Members and Veterans get the financial help they need. We also offer specialized debt help for military personnel.

Get more information about military debt consolidation »

Getting debt relief for other types of debt

Credit card debt is not the only type of debt that you can include in a debt management program. You can consolidate almost any type of unsecured debt, not including student loans. This includes debt consolidation loans, unpaid medical bills that have gone to collections, and even some payday loans. If you’re struggling with student loans, then you will need a specialized type of debt relief.

• Learn more about consolidating medical debt »
• Overcome challenges with payday loans »
• Get information about student loan consolidation »

Using debt consolidation to get relief

Debt consolidationis often the preferred choice for debt relief because of the benefits it provides. With consolidation, you pay back everything you owe while minimizing interest charges. You can often enjoy lower monthly payments, even while you pay off your debt faster and save thousands. There’s also no credit report damage, which you see with other solutions like debt settlement and bankruptcy.

There are three basic ways to consolidate credit card debt:

Option 1: Do a credit card balance transfer so you can pay off the debt interest-free

Credit Limitation: This option only works if you have good credit; excellent credit is better. Balance transfer credit cards offer 0% APR on balance transfers when you open the account. An excellent credit score means you qualify for the longest 0% APR introductory period possible. Some cards have promotions that run up to 18 or 24 months. That gives you up to two years to pay off your debt interest-free.

Be Aware of Fees: Balance transfers always involve transfer fees, even when you have 0% APR. You pay a fee for every balance you transfer – anywhere from $3 to 3 percent.

How It Works:

• You open a balance transfer credit, qualifying for rates and terms based on your credit score
• Then you transfer the balances from your existing accounts to the new account with fees added.
• You have a set number of months to pay off your debt with no interest charges.

Make sure to calculate carefully to ensure you eliminate the balance before the clock runs out. If you can, this will give you the biggest cost savings, because there are no interest charges. Otherwise, the interest rate on your debt could be even higher than it was originally.

Learn more about credit card debt transfers »

Option 2: Consolidate the debt with a low-interest personal loan

Credit limitation:Like a balance transfer, a personal debt consolidation loan is usually only a viable solution for consumers who have a good credit score. The higher you score, the lower the interest rate you can qualify for on the loan. APR of 5% is ideal, but anything below 10% may be enough to provide the relief you need. If you can’t qualify for a rate below 10%, look for other options.

How It Works:

1. Check rates with your bank or credit union, as well as other financial institutions and online lenders. Your goal is to find the best rates and terms.
2. Apply for the loan that fits your needs. The lender bases your approval on your creditworthiness.
3. Once approved, you use the money you receive from the loan to pay off your debts; in some cases, the lender will send the money directly to your creditors.

Essentially, you use the money from the loan to pay off your credit card balances and other debts. You can pay off things like medical bills, too.

When using this option, you want a loan with a term of five years or less. Any more than that means your total repayment costs will be too high. Just keep in mind that a shorter term means higher monthly payments. Calculate carefully to make sure you can afford the payments.

Explore personal debt consolidation loans »

Option 3: Enroll in a debt management program through a credit counseling agency

The benefit of professional help:A debt management program is the solution you use if you can’t make progress on your own. If you don’t have good credit or you’ve missed some payments, your creditors may be resistant to working with you. Having the help of a credit counseling agency means you have a team advocating with creditors on your behalf. That makes it easier to craft a repayment plan that your creditors will actually accept.

How It Works:

1. First, you talk to a certified credit counselor to review all your options. The counselor makes sure a debt management program is the right solution; otherwise, they can direct you on where to go.
2. If debt management is the right choice, they can help you enroll. Together, you find a monthly payment that works for your budget.
3. Then the counselor calls each of your creditors to get them to sign off on the adjusted repayment schedule.
4. They also work with creditors to reduce or eliminate interest charges, as well as to stop future penalties.

Learn more about a debt management program »

A few debt relief options you want to avoid

The three options outlined above are not the only options that consumers can use. There are other ways to find debt relief – we just don’t recommend them. At Consolidated Credit, we promote a “do no harm” strategy when it comes to debt relief. In other words, your debt solution should not put you in a worse position than when you started.

Each of the solutions above – when used correctly – can eliminate your debt without causing credit damage or making your financial situation worse. Other solutions can decrease your credit score or negatively impact your long-term financial plan.

For instance, you can:

1. Use ahome equity loanto pay off debt. However, this puts you at an increased risk of going into foreclosure. If you miss payments, you could lose your home.
2. Tap into your 401(k) or IRA, but you may face early withdrawal penalties. It also drains funds in savings that you need later in life to retire on time.
3. Settle the debt for less than you owe, but this will damage your credit score. You may also be required to pay income taxes on your next tax filing for the amount you settled.
4. File bankruptcy, which can allow you to get out of debt in as few as 90-120 days. However, you can damage your credit for up to ten years.

Good ways to find relief versus bad ways

The right debt relief solution will help you reach zero without creating new financial risks or damaging your credit. When it comes to bad ways to seek debt relief, there may be some circ*mstances where using one of these solutions would be the best option. However, you should exhaust every other option first before you consider these last resorts.

Deciding it’s time to get professional help

Sometimes, we get resigned to trudging forward, even if we’re not really getting anywhere.

Here’s a simple truth: Minimum payment schedules were never designed to help you get out of debt. Interest charges are revenue and profits for credit card companies, which means they’re quite happy if you stay in debt forever.

Thus, minimum payments only pay back a small percentage of what you owe – usually around 2%. It’s more affordable month to month, but the trade-off is that you stay in debt for a long time. Many times, if you only make minimum payments you could be paying those purchases off for decades.

And that’s only half the problem. If you run up high balances then even larger payments may not make a dent quickly at such high rates. Depending on your available cash flow and interest rates, it may be impossible to pay off your credit cards efficiently.

Try a simple test:

1. Use the debt calculator below to see how long it would take to pay off just one of your big balances. You may want to review your budget to see if there are any expenses you can cut to free up more money for debt elimination
2. Enter the balance and your current interest rate; if you don’t know your payment schedule, check your statement or choose 2%.
3. Now weigh two other options: Pay the minimum plus a little extra or make a larger fixed payment.

On the other hand, if you still want to try paying off the debt with regular payments, follow the steps below. They will increase your chances for success.

Step 1: Negotiate lower rates with your creditors

A lower rate means more of each payment you make can go towards the debt instead of accrued interest. This does accelerate repayment, especially if you make larger payments.

Your chances of a successful negotiation increase if:

• You’re not behind on your payments
• Your credit score increased since you opened the account
• You’ve been a loyal customer for a number of years

If you are not successful negotiating on your own, then that may be a sign you need the help of professional credit counseling services. Having a team of experienced negotiators on your side with established relationships with creditors can go a long way in making sure you get the results you want.

Step 2: Implement a debt reduction plan

You basically strategically arrange your bills and make the largest payments possible on one debt at a time. You find as much cash flow as possible in your budget by eliminating expenses, then target each debt successively.

We offer resources that describe how to implement an effective debt reduction plan.

Are there government credit card debt relief programs?

Currently, there are no government-sponsored or government-backed programs that provide credit card debt relief to consumers. For example, unlike what you see with federal student loans, you cannot apply to have credit card debt forgiven without penalties. No program allows you to refinance or modify the terms of your credit card agreement like there were with mortgages during the Great Recession.

What the government does provide is oversight and regulation of debt relief services:

• TheCredit Card Debt Relief Act of 2010passed during President Obama’s administration prevents debt settlement companies from charging upfront fees. These companies may not charge fees until a debt is successfully settled on the consumer’s behalf.
• TheUniform Debt Management Services Actoffers guidance to state governments on how to regulate credit counseling and debt settlement services. Under this agreement, many states:
  • Only allow registered nonprofit credit counseling organizations to provide debt management services
  • Cap fees for debt management services (fees are also capped nationwide at $79)
  • Require both credit counseling and debt settlement companies to be accredited by a nationally-recognized association, which maintains strict ethical standards.
  • Require credit counseling agencies and debt settlement companies to provide financial education as well as debt relief services.
• TheDepartment of Justicealso authorizes certain nonprofit credit counseling organizations to provide pre-bankruptcy counseling and debtor education.

Does Consolidated Credit adhere to these guidelines?

Yes. Consolidated Credit is a registered 501(c)3 nonprofit organization. We are nationally accredited through the Financial Counseling Association of America (FCAA). We are also approved by the Department of Justice to providepre-bankruptcy counselingin our home state of Florida.