Credit card debt relief

There are several ways to approach the debt relief process—each with potential pros and cons. Programs and methods might not work for everyone. But learning about different approaches could help you find an option that works for you. 

What you’ll learn:

• The Consumer Financial Protection Bureau (CFPB) recommends contacting lenders directly to see what options might be available.

• Balance transfers and debt consolidation methods could help simplify payments and lower interest rates

• Certified credit counselors can offer personalized debt planning. But counselors are different from debt settlement companies, which can be risky to work with.

• Bankruptcy is often considered a last resort.

There are multiple ways to approach credit card debt relief. 

Researching and talking to a financial expert could help you find the option—or options—that works best for you. Here are a few you could consider:

The CFPB and the Federal Trade Commission (FTC) recommend contacting individual lenders to investigate what options might be available. Even small changes, like requesting a new due date, might make it easier to keep up with payments.

You can typically find your lender’s contact number on the back of your credit card or on your statement. There are a number of ways Capital One cardholders can reach out.

A credit counselor might be able to provide advice about money, debts, budgeting and more. The CFPB says most credit counseling companies are nonprofit organizations and that counselors may:

• Give advice about managing money and debts

• Assist with budgeting expenses and debt payments

• Help secure copies of credit reports and scores

• Organize a debt management plan to pay down debts

The CFPB says that with a debt management plan, every month a single payment is made through a credit counselor who then makes the monthly payments to creditors. Credit counselors may work with creditors to negotiate loan repayment extensions, interest rates and fees.

Credit counseling companies may charge fees to handle debt management plans and other services. But the CFPB says a reputable company should provide free information about its services.

The CFPB says the National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA) are two resources for finding reputable services.

Balance transfers involve moving debt from one credit card to another. Consolidating debt could make payments more manageable, especially if a new card has a lower annual percentage rate (APR). 

But remember that there still might be a fee to transfer balances. And introductory rates don’t last forever. So it’s a good idea to check what the standard APR will be after a promotional rate ends.

Debt consolidation loans are similar to balance transfers. The idea is to find a loan with better terms, use the lump sum to pay off credit card debts and then pay off the loan separately.

The long-term costs of a debt consolidation loan are determined by the loan terms, among other things. A longer loan term might mean a smaller monthly payment but more interest. A shorter loan term might mean less interest but larger monthly payments.

Promotional rates on credit cards or personal loans may be temporary. 

The CFPB defines debt settlement companies as “for-profit companies that charge a credit card debt settlement fee for their services.” They’re different from credit counseling companies, and the CFPB warns that working with debt settlement companies can be risky. 

These companies may charge high fees. And they might encourage clients to stop paying credit card bills altogether. That could mean late fees, interest charges, derogatory credit marks and more. And, creditors may not always be willing to work with debt settlement companies.

According to the federal courts, bankruptcy is a proceeding that “helps people who can no longer pay their debts … by liquidating assets to pay their debts or by creating a repayment plan.”

There are two primary types of personal bankruptcy: Chapter 7 and Chapter 13. Filing for bankruptcy could come at a cost to personal finances and credit. That’s part of the reason why the FTC says it’s “generally considered the option of last resort.”

As you research which credit card relief method best suits your situation, beware of debt relief scams. According to the FTC, scammers target people with significant credit card debt with false promises.

“These operations often charge cash-strapped consumers a large up-front fee,” the FTC says, “but then fail to help them settle or lower their debts—if they provide any service at all.” Scammers might also claim they can remove negative information from credit reports.

Remember, using credit responsibly over time is the only way to improve your credit scores.

There are multiple ways to approach debt relief. Working with a financial expert could help. But it might help to start with your credit card issuer to see what options might be available—or learn more about strategies to pay off credit card debt.