What to know before choosing a debt relief strategy
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Updated on: August 31, 2026 / 12:04 PM EDT / CBS News
Credit card debt has become increasingly expensive to carry over the last few years, and balances are continuing to grow. Americans owed $1.26 trillion on their credit cards in the second quarter of 2026, up $21 billion from the previous quarter, according to the latest Federal Reserve Bank of New York data. And, the average interest rate on credit card accounts that were assessed interest was above 22% during the same quarter. In turn, interest charges tend to consume a substantial portion of borrowers' credit card payments, making it harder to pay down what's owed .
Those challenges can become even more pronounced, though, when household expenses are rising simultaneously, as they have been over the last several months. As a result, some borrowers may reach a point where simply cutting spending or putting more money toward their monthly payments isn't enough to make meaningful progress. That's when the idea of debt relief can enter the conversation. But it's important to understand that debt relief isn't a single solution, and the different strategies available can vary significantly in terms of their costs, requirements, savings and credit impacts.
That means finding the right approach requires more than choosing the option that promises to eliminate your debt the fastest. Your balance, income, ability to make monthly payments and even the types of debt you carry can all influence which strategy makes the most sense — and choosing the wrong route could leave you facing unnecessary costs or other financial consequences. So, before settling on a debt relief strategy , there are a few important factors worth weighing.
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If you're struggling with debt, it can be tempting to jump into the first solution, but there are a few things to know before committing:
Not all debt relief options apply to every type of debt. Some strategies work primarily for unsecured debt, such as credit cards and personal loans, but may not help much with secured debts like mortgages or auto loans. So, knowing exactly which debts you're trying to resolve can help narrow down the options.
For example, debt settlement programs involve negotiating with creditors to reduce the amount owed, and are generally designed for unsecured debts that you can no longer afford to make payments on. Debt consolidation loans , on the other hand, combine multiple balances into one new loan, ideally with a lower interest rate, saving you money on interest charges. Filing for bankruptcy is another option, and while it may help address a broader range of debts, it also comes with long-term financial consequences.
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Your income, savings and monthly cash flow matter when choosing a debt relief strategy, as some options require you to make consistent, reduced payments over many years, while others pause payments. In turn, you need to know what options are realistic in terms of your current financial situation. It's also important to think about whether your financial situation is likely to improve in the near future. Choosing a strategy that depends on aggressive repayment may not be realistic if your income remains uncertain, but it could be an option if you expect your financial issues to largely resolve in the shorter term.
Many borrowers focus only on reducing their monthly payments or total balance, but the impact that certain debt relief strategies can have on their credit score is another major factor to weigh. Some debt relief strategies may have minimal long-term credit consequences, especially if payments continue to be made on time. Others, however, can significantly damage your credit profile.
With debt settlement , for example, borrowers generally stop making payments temporarily while saving up for settlement offers, though many borrowers have already fallen behind prior to enrolling in this type of program. That, in turn, leads to credit damage, so if you're still current on your debt payments and care about your credit score, it may not make sense to pursue this path.
There's a longer-term issue with bankruptcy, meanwhile, which remains on your credit report for seven to 10 years and, in turn, impacts your ability to qualify for future loans, housing or even certain jobs. While rebuilding your credit is possible, understanding the tradeoffs upfront is critical.
Debt relief services are not free, and some programs can be more expensive than they appear on paper if you don't fully understand the fee structure. For example, debt settlement programs charge fees based on the amount of debt enrolled or the amount forgiven, but those fees should not be charged until a settlement has been negotiated for a debt. Consolidation loans can lower your interest charges, but this type of borrowing includes other costs, like origination fees, that can drive up overall costs.
So, before enrolling in any program, make sure to review the total costs carefully and ask detailed questions about fees, timelines and guarantees. Be cautious of any company promising instant results or claiming it can erase debt quickly without consequences. Legitimate debt relief providers should clearly explain the benefits and the risks involved.
Debt relief is rarely an overnight solution. Depending on the type of program you choose, it could take months or even years to complete, particularly if you're repaying large balances or negotiating settlements over time. That timeline matters because your financial priorities may change. You may want to buy a home, refinance existing debt or rebuild your credit sooner rather than later.
In turn, understanding how long a strategy could affect your finances can help you decide whether it aligns with…
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