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With inflation and interest rates on the rise, it’s no surprise that so many Americans are turning to credit cards for support. Credit card debt in the United States is now at $986 billion, causing many people to feel overwhelmed with debt.
Thankfully, there are credit card debt relief options available to alleviate your financial burdens and make strides toward becoming financially stable. Credit card debt relief programs vary and are personalized to your situation. However, some of the options carry risks.
In this guide, we’ll go through everything you need to know about credit card debt relief, the steps to take and the risk associated with getting out of debt.
Key takeaways:
Table of contents:
Credit card debt relief is assistance with paying off a balance you owe. While debt relief doesn’t erase your debt, it does help adjust the repayment terms. Some credit card debt relief options include working with your creditor to grant lower interest rates, creating a payment schedule that lowers your monthly payments and pursuing debt consolidation.
Credit card debt relief involves taking steps to make debt and repayment manageable. Credit card debt forgiveness is when some or all of the outstanding balance of a loan or line of credit is forgiven and doesn’t need to be paid back. However, credit card debt forgiveness is not a silver bullet that erases all your debt, nor does it come free of potential risks, but the two strategies can work together.
For example:
Keep in mind that not all creditors forgive or settle debts, and it could negatively affect your credit. You may also have to pay taxes on the forgiven debt.
To determine if you need credit card debt relief, you should evaluate your specific financial situation. Keep in mind that if your debt can be repaid by making small changes in the way you spend, that’s always the best route. But if you’re budgeting meticulously and barely staying afloat (or you’re sinking), you may need to seek help.
Here’s how to know if you’re a candidate for debt relief assistance:
If you’re buried in debt but don’t know where to go, take the following steps. You might be able to get relief sooner than you’d expect.
Here are the following steps you should consider after evaluating your situation:
There are several options when it comes to credit card relief. In general, it takes three to five years to see major improvements in your credit through debt relief programs, but putting in the time and effort now can help you in the long run. Here are the common types of credit card debt relief.
If you have high-interest debt on a credit card, you can transfer the balance to a different card with a lower interest rate. By paying less in interest, more of your payments will go toward the principal balance, allowing you to pay off your debt faster.
When making a balance transfer, check to see if the new card offers a low introductory interest rate. An introductory interest rate, which could be as low as zero percent, usually lasts for a certain period of time, such as six to 18 months.
Keep in mind that any late or insufficient payments can invalidate these lower interest rates. If you think you can pay off a good part of your debt within that time, a transfer might be a wise choice. A fee for transferring a balance is common—usually about 3 percent of the balance amount. If you have a good credit score, this fee might be waived.
Pros of balance transfer | Cons of a balance transfer |
---|---|
Can provide a much lower interest rate, making your payments more manageable | Might require a good or excellent credit score |
Usually a convenient process | If you don’t have a good credit score, the fee to transfer might be expensive |
Combines many payments into one if you transfer multiple balances | Once introductory interest rates are over, the interest rates could be higher |
– | New purchases won’t be interest-free like the balance transfer |
– | Can be complicated to put your payments toward your balance transfer vs. new purchases |
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