- As of July 2022, the federal government wasn’t offering a debt relief program for credit card debt, though the Servicemembers Civil Relief Act caps interest rates for active military members.
- If you’re not in the military, working with your credit card company, using consolidation products and consulting with a credit counselor are just a few ways to get some relief.
- Avoid procrastinating coming up with a plan for tackling your credit card debt.
If you're struggling with credit card balances, you may be looking for federal debt relief in any form you can find, including from the government. Unfortunately, there is no credit card debt relief government program available, as of July 2022, at least for civilians. The Servicemembers Civil Relief Act puts a limit on credit card APRs for active military members.
For everyone else, there are still options available, depending on your situation. You could look to consolidate your debt (if you have good credit) or enlist the help of a counselor or lawyer.
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Federal debt relief for military members
If you're a member of the armed forces, you can automatically qualify for the only known credit card debt relief government program. It delivers a reduced interest rate on certain credit card debt and other types of debt.
In fact, the Servicemembers Civil Relief Act (SCRA) sets a 6% cap—some lenders willingly go as low as 4%—for interest rates on debt you took out prior to entering active duty military service, but only if you're currently in active duty service. Some card issuers may also waive your annual fee during this time.[14, 15]
"That is a huge reduction from the interest rates most credit cards charge," says Andrew Latham, a CFP and managing editor of SuperMoney.com. "The only thing servicemembers have to do to qualify is notify their lender in writing and attach a copy of their orders to active duty service and a letter from your commanding officer showing when you started active duty service."
Contact your credit card issuer
It might not sound like the best move when you can't pay your credit card balance, but contacting your credit card company is always a good idea if you're worried about missing a payment.
Depending on your situation and the card issuer, potential relief can come in the form of one of the following:
Reduced interest rate: Some credit card companies may agree to lower your interest rate for a set period to cut the amount of interest that's accruing on your balance.
Lower monthly payment: Your card issuer may agree to a modified payment plan that involves a reduced monthly payment for a set amount of time.
Forbearance: In some situations, you may be able to get your credit card payments paused for a short period of time. That said, interest may still continue to accrue, and forbearance doesn't reduce your actual balance.
Fee waivers or refunds: If you're already behind, you may be able to convince your credit card company to waive late fees or refund past late fees that have already been added to your account.
Keep in mind that these options are entirely at the discretion of your card issuer, so there's no guarantee that you'll get the relief you're looking for.
"The best approach is to be persistent and polite. You will need to keep good records of your debt," says Latham. "A realistic goal is to negotiate a modified payment plan that either extends the repayment period, reduces the amount you owe or a combination of both."
If you have good credit: Use a balance transfer card or debt consolidation loan
If you're having trouble paying down credit card debt, but your credit score is still in good shape, you may consider debt consolidation via a balance transfer credit card or a debt consolidation loan:
Balance transfer credit card: This type of credit card offers an introductory 0% APR on balances transferred from another credit card. Depending on the card, you may get up to 21 months to pay off your debt interest-free. If you have a remaining balance at the end of the promotional period, you'll only be charged interest on that amount. That said, there's usually an upfront balance transfer fee of 3% to 5%. And depending on your income, credit history and other factors, you may not get a high enough credit limit to transfer all of your debt.[5, 6]
Debt consolidation loan: A debt consolidation loan is a personal loan used specifically to pay off other debt. You won't get a 0% APR, but with good credit, you could potentially get a personal loan with an interest rate under 10%. Debt consolidation loans can be helpful if you need a structured repayment plan—even with a balance transfer card, it can be easy to get complacent with a small minimum payment. However, some personal lenders charge an upfront origination fee, which can be as high as 8% of the loan amount.[7, 8]
With both options, it's important to use an online calculator to run the numbers to make sure that you can afford the new monthly payment and that it'll help reduce your interest charges.
If you don’t have good credit: Request credit counseling
If your credit score isn't in good enough shape for debt consolidation and you're struggling to afford your monthly payments, consider consulting with a credit counselor. You can usually get a free consultation from a nonprofit agency, which you can find through the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).[9, 10]
A credit counselor can help you make sense of your situation and provide you with some advice on how to tackle your debt.
If you're a good candidate, they may also help you get on a debt management plan. With this type of payoff plan, the counseling agency can negotiate lower interest rates and monthly payments with your credit card issuers.
Additionally, instead of paying your credit card companies directly, you'll make one monthly payment to the credit counseling agency, which will distribute the money to your creditors.
Debt management plans typically last three to five years and won't damage your credit like debt settlement and bankruptcy. However, you will be required to close your credit card accounts, which can increase your credit utilization rate and ding your credit score temporarily.[11, 2]
Also, the agency may charge you a fee of up to $75 to set up the plan, and you'll also need to pay a monthly fee, which can be upwards of $20.
Try to settle the debt
Debt settlement may be worth considering if you're already behind on your debt and your missed payments have already taken a toll on your credit score.
With this approach, you can offer to settle your debt for less than what you owe. However, you'll typically need to pay a lump-sum amount, so it might not be an option for some people.
If you want to settle but don't have the cash on hand, you can enlist the help of a debt settlement company or a debt attorney, who can help you negotiate and give you some time to save up for the settlement amount.
Note, however, that debt settlement can damage your credit score significantly because it signifies that you're not paying as you originally agreed.
Consult with an attorney
If you're dealing with liens on your property, wage garnishments, bank account freezes or even a lawsuit over your credit card debt, it's a good idea to contact a debt attorney right away. Even if you choose not to hire an attorney, your initial consultation can help you determine the best course of action.
If you decide to hire an attorney, though, they can negotiate on your behalf, stopping the creditors from contacting you directly, and guide you through the legal process. They can also inform you of your rights and ensure that they remain protected.
An attorney can also help you determine whether bankruptcy might be a good option for you.
"Bankruptcy is not a government program in the way most people think of government programs," says Latham, "but you can often get rid of credit card debt if you file for Chapter 7 Bankruptcy and your income passes the means test."
Regardless of your situation, it's crucial that you take the time now to research your options and start taking action to address the issue. If you let credit card debt get out of hand, it'll only be more difficult to manage it. While there's no singular approach to getting relief for credit card debt, there are still plenty of options available to help you get what you need.