How Does Credit Card Debt Relief Work?

Most adults in the United States (81%) have at least one credit card, and Americans’ total credit card balances broke a new record—more than $1.3 trillion—in July 2025. Credit card debt can be a significant burden for many people, but some options may offer relief. The best debt relief companies can negotiate with card issuers to lower the amount you owe on your credit cards in exchange for a fee based on the amount settled. Other options, like debt consolidation and debt management, can be alternatives to debt relief, though.

What Is Credit Card Debt Relief?

Credit card debt relief is a service offered by various companies and organizations, mostly legitimate, though some can be shady. Typically, these organizations promise to negotiate with creditors on behalf of individuals to reduce the amount they owe. Debt relief is not the same as credit card debt forgiveness, which completely erases outstanding debt.

Types of Credit Card Debt Relief Programs and Alternatives

There are several types of credit card debt relief programs and alternatives to help manage and pay down debt. Each program has potential benefits and downsides.

Debt Settlement

Debt settlement companies, sometimes referred to as debt-relief companies, promise to reduce their clients’ overall credit card debt by negotiating repayment for less than the total amount owed.

The debt settlement process often takes years. In the meantime, the debt settlement firm may ask the customer to stop paying their creditors and to place money in a dedicated account to pay the settlement once it is reached.

That can be a risky move. As the Consumer Financial Protection Bureau points out, “If you stop making payments, you will likely damage your credit. You may face collection efforts, additional late fees, and penalty interest charges, and you might be sued. These fees will cause your debts to grow larger.”

Debt settlement companies often charge substantial fees, and there is no guarantee that they will be successful. While many debt relief companies are legitimate businesses, this field is also rife with scam artists.

Debt Management

Debt management plans are an alternative to debt settlement and work differently. While debt settlement and debt relief companies are often for-profit businesses, debt management plans are typically offered by nonprofit credit counseling agencies.

A credit counselor will work with a client’s creditors to try to lower their interest rates and stretch out their monthly payments—but not attempt to erase any of their debt. The client will make a monthly payment to the credit counseling agency, which will pass that payment on to creditors.

Participating in a debt management plan won’t damage your credit score. Credit counseling agencies may charge modest enrollment and monthly fees or provide services free of charge.

Debt Consolidation

Debt consolidation is another alternative to debt settlement or relief. It involves taking out a new loan or opening a new line of credit and using it to pay off your existing debts. You then have just one payment to make each month, ideally at a lower interest rate than the debts you have consolidated.

You can consolidate credit card debt in a few different ways. Those include:

Ideally, you’ll also be able to get a lower interest rate than you were paying on your old debts. Many balance transfer credit cards, in fact, charge low or even 0% interest rates for a certain promotional period, such as 12 months.

On the upside, debt consolidation can simplify your finances and possibly save you money on interest. On the downside, you may have substantial upfront costs, such as a loan origination fee or balance transfer fees. And, of course, if you fail to make on-time payments going forward, you could damage your credit score.

Factors to Consider When Choosing Credit Card Debt Relief

If you’re shopping for a debt relief company, don’t settle for the first one that looks good on the surface. Instead, take a hard look at several of them and what they have to offer. That includes:

• Fees. Credit card debt relief companies charge fees for their services, which are sometimes quite high. Consider whether these fees could negate any savings you might gain by working with them.
• Reputation. Debt relief scams often target people who have high credit card debt. These companies will charge expensive upfront fees and fail to deliver on their promises to reduce your debt. So dig into the reputation of any company you’re considering. For example, have complaints been filed against it by the Federal Trade Commission, the Consumer Financial Protection Bureau, the Better Business Bureau, or your state attorney general’s office or consumer affairs department?
• Success rate. Even if a debt relief company offers legitimate services, there is no guarantee that it will reduce your debt load. Your creditors are under no obligation to negotiate. Ask any prospective company to tell you how often it is successful and how much money you would be likely to save if it is.

If you decide to go the debt relief route, also look closely at the financial habits that may have put you in this situation in the first place. Sometimes people get into credit trouble through no fault of their own—the result of a sudden job loss or medical emergency, for example. But many times, it’s because of needless overspending. If that’s the case, do your best to make a realistic budget and plan so it doesn’t happen again.

Potential Consequences and Risks of Credit Card Debt Relief

Some companies promise to put you on the least expensive path to getting out of debt. While that possibility can be enticing, it is important to consider the potential risks associated with credit card debt relief.

Credit card debt relief is very likely to harm your credit score, and a settled account could remain on your credit report for up to seven years.

You may end up owing more than you originally did when you take into account the fees you could end up paying the debt relief company. In cases where a debt company fails to negotiate with your creditors, you will owe more in interest as well. It is also essential to know that forgiven debt is very often taxable.

Whatever you do, avoid working with any company that “guarantees” to erase your debt or charges high upfront fees before starting work on your behalf.

Alternatives to Credit Card Debt Relief

The programs described above may be the right fit for some people, but they are not the only way to reduce your credit card debt.

If you can increase your income, such as through part-time work or other means, you can focus on allocating more of your monthly budget to paying down your credit card debt.

You also have the option to negotiate with your credit card companies directly. You may be able to work out a payment plan or a lump sum payment to settle the debt.

For some people in particularly difficult situations, bankruptcy may be the best option to deal with overwhelming credit card debt, although it can have serious and long-lasting consequences.

The Bottom Line

If you have more credit card debt than you can handle, there are a number of ways to address the situation, including debt settlement or debt relief programs. Before you sign up for a program, be sure to find out: How long will the process take? What kind of fees will you be charged? How will your credit score be impacted? And be wary of companies that make promises they can’t (or don’t intend to) keep, or you could end up in an even worse situation.