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With credit card interest rates sitting at an all-time high of about 23% on average, it’s no surprise that many people are struggling to keep up with their monthly credit card payments. After all, the average American carries approximately $8,000 in credit card debt and with interest charges being calculated at today’s high interest rates, it’s surprisingly easy to find yourself trapped in a cycle of credit card debt with no end in sight.
Today’s high credit card rates aren’t the only issue, though. There are other economic challenges at play, too, like inflated housing and grocery prices leftover from years of high inflation. With the essentials taking up even more space in people’s budgets, many people have found themselves strapped for cash recently. That, in turn, has led more people to turn to this type of short-term borrowing to make ends meet, resulting in an uptick in credit card usage.
But even if you owe more than the average — let’s say $10,000 or more — there are options, like credit card debt forgiveness, that can help you reduce your credit card debt burden. With debt forgiveness, the goal is to come to an agreement with your card issuers to reduce the total balance in return for a lump-sum payment on the account. But how much of that $10,000 in credit card debt could be forgiven?
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How much of a $10,000 credit card debt will a forgiveness plan cover?
Credit card debt forgiveness won’t erase your entire debt, at least not in most cases. So, if you’re hoping to walk away completely debt-free, you may need to consider more drastic measures like filing for bankruptcy, though this comes with long-lasting consequences. On the other hand, debt forgiveness is a less damaging option for reducing your debt load.
Typically, credit card debt forgiveness programs result in settlements that reduce your outstanding balance by 30% to 50%. This means that if you have $10,000 in credit card debt, you could end up paying back anywhere from $5,000 to $7,000, on average. This is a significant reduction that could provide some breathing room in your budget. But it’s important to know that qualifying for debt forgiveness isn’t automatic.
To qualify for debt forgiveness, most companies require you to have at least $7,500 in credit card debt. That means if you’re dealing with $10,000, you’re likely already eligible, but being eligible doesn’t guarantee approval. You’ll also need to prove that you’re facing financial hardship — such as a job loss, a serious medical issue or another significant financial setback — that makes it difficult for you to keep up with your credit card payments.
So, if you’ve been making the minimum payments on your credit card on time each month, you might not be viewed as an ideal candidate for debt forgiveness, even though the minimum payments will barely reduce your balance. Lenders tend to prioritize working with borrowers who are behind on their payments, as this signals greater financial distress.
That means missing a few payments can improve your chances of qualifying for debt forgiveness, though there are obvious (and serious) financial repercussions of doing so. If you meet the lender’s qualifications, however, you could significantly reduce your balance and potentially work out a settlement that lowers your credit card debt to a more manageable level.
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Other debt relief options to consider
While credit card debt forgiveness can be a helpful tool, it’s not the only debt relief option available to you. If you’re not a good candidate for debt forgiveness or if you want to explore other ways to reduce your credit card balance, consider alternatives such as:
- Debt consolidation loans: These loans can help combine multiple debts into one loan with a lower interest rate, making your debt cheaper and expediting the repayment process.
- Debt management programs: Debt management programs help you create a structured repayment plan that can lower interest rates and fees, helping you pay off debt faster.
- Balance transfer credit cards: These cards offer a low or 0% introductory interest rate, allowing you to transfer your balance and save on interest costs for a set period (typically 12 to 21 months).
The bottom line
For those grappling with $10,000 or more in credit card debt, debt forgiveness can be a helpful way to reduce the amount owed, though it likely won’t erase the full balance. But while the right debt forgiveness program can help cut down on your credit card debt, it’s still essential to explore all available options, including debt consolidation, debt management and balance transfers, to determine which makes the most sense for you. And, depending on the specifics of your unique situation, it may also help to seek advice from a debt relief specialist to find the best path forward.
