Credit card debt relief
Debt relief can take many forms—this article will cover a few—but before you start researching, keep in mind there may be benefits and risks with each option. If you’re having trouble with credit card bills, starting with a financial expert might help.
- The Consumer Financial Protection Bureau (CFPB) recommends contacting lenders directly to see what options might be available.
- Balance transfers and other debt consolidation methods could help simplify payments and lower interest rates.
- Certified credit counselors might offer advice, assistance and personalized debt planning.
- Working with debt settlement companies, sometimes called debt relief or debt adjusting companies, can be risky.
There are several ways to approach the debt relief process—each with its own potential pros and cons. Programs and methods might not work for everyone, so it’s a good idea to thoroughly research and talk to an expert if possible.
1. Contact lenders
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.
Contact numbers are typically available on the back of credit cards or on credit card statements. There are a number of ways Capital One cardholders can reach out.
2. Credit card balance transfers
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).
Having a good credit score might make it easier to qualify for a low introductory rate. But remember that there still might be a fee to transfer balances. And 0% APR offers probably won’t last forever. So it’s a good idea to check what the standard APR will be after any promotional rate ends.
3. Debt consolidation loan
Debt consolidation loans are similar to balance transfers. The biggest difference is they involve using personal loans instead of a credit card to pay off debts. 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 balance separately.
Using a personal loan for debt consolidation won’t actually reduce debt. It’s also worth noting that so-called teaser rates may only be temporary.
The long-term costs of a debt consolidation loan are determined by 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.
4. Credit counseling
A credit counselor might be able to provide advice about money, debts, budgeting and beyond. The CFPB says most credit counseling companies are nonprofit organizations and that credit counselors might be able to:
- 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 National Foundation for Credit Counseling and the Financial Counseling Association of America are two resources for finding reputable services.
Debt management plans
According to the CFPB, debt management plans involve making a single payment through a credit counselor who then makes monthly payments to creditors. By negotiating extensions to repay loans and asking creditors to lower interest rates and waive fees, counselors may be able to lower overall monthly payments—not necessarily the total owed, though.
Even though credit counseling companies are usually nonprofit organizations, they still 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.
5. Debt settlement companies
The CFPB says debt settlement companies are “for-profit companies that charge a fee for their services.” They’re different from credit counseling companies. And the CFPB warns that working with debt settlement companies can be risky.
Debt relief or debt adjustment companies, as they sometimes call themselves, might offer to negotiate with creditors in exchange for paying a lump-sum settlement to resolve debt. Different creditors may take different positions about working with debt settlement companies.
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.
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.”
Finding a debt solution that works
With so many debt relief options, deciding on a course of action can feel overwhelming. 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.
When it comes to credit counselors—and riskier debt relief companies—the CFPB says it’s a good idea to check with your state’s attorney general or consumer protection agency to check on previous complaints and licensing standards.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.
Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. It may not be the same model your lender uses, but it can be one accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies.