6 signs that credit card debt forgiveness could save you money this July

Credit cards have always been an expensive way to borrow thanks to the high rates, compounding interest charges and extra fees they come with — and this type of debt is only getting pricier. With credit card interest rates currently averaging nearly 22%, just under an all-time high, many cardholders are now realizing that even their small revolving balances can balloon quickly. And, if you’re carrying a significant amount of credit card debt, chances are you’re paying hundreds — or even thousands of dollars — more than you need to for the interest charges alone.

Adding that amount of interest to your balance can make it nearly impossible to get your debt issues under control, especially if you’re struggling to keep up with the minimum payments. That’s part of why so many cardholders are turning to credit card debt forgiveness as a potential money-saving solution right now. The goal of this debt relief strategy is to negotiate with your creditors to reduce what you owe in return for paying a lump sum to settle the account.

As a result, debt forgiveness can provide substantial savings under the right circumstances. But how do you know if debt forgiveness could actually leave you with more money in your pocket? Below, we’ll examine six signs that it could save you money this July.

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6 signs that credit card debt forgiveness could save you money this July

If you’re trying to decide whether credit card debt forgiveness is the right route for your finances, these signs could indicate that this type of debt relief will help you save enough to justify the costs: 

You’re paying more in interest than principal each month

If a big chunk of your monthly payment is going straight toward the credit card interest charges — not reducing your actual balance — you’re not just stuck in debt. You’re hemorrhaging money. In these cases, debt forgiveness could save you money by helping you settle the balance for less than you owe, essentially cutting the high-cost repayment timeline short. That means fewer payments, less interest paid over time and more cash left in your bank account.

Compare your debt relief options and find the right strategy now.

You’re eligible for a significant reduction in your balance

Debt relief companies reduce their clients’ unsecured debt by an average of 30% to 50%, and in certain cases, they may help lower your balance even more (depending on the situation and the creditor). If your credit card company is willing to negotiate, and you have the financial hardship to back it up, this route can translate into major dollar savings.

Let’s say you owe $15,000 in credit card debt and work with a debt relief company to have a portion of your debt forgiven. A successful negotiation could potentially slash that balance by $4,500 to $7,500. While you may pay fees (typically 15% to 25% of the enrolled debt) for the service, the net savings can still be in the thousands. And that, in turn, would likely make this type of debt relief worth pursuing.

Your current repayment timeline will cost you more than a settlement

If you’re on track to take five or more years to repay your debt (by making minimum or low monthly payments), you should compare that total cost to what you’d pay in a debt forgiveness program. If the numbers show you’ll spend far more in interest by sticking to your current payoff plan, negotiating a settlement could significantly reduce your long-term cost.

You’ve already been hit with penalty APRs

If your credit card issuer has raised your interest rate due to missed payments or delinquency, you’re likely paying an even higher penalty APR right now, which in most cases is upward of 29%. That interest rate spike can cause even moderate balances to grow out of control. By negotiating a lump-sum settlement through debt forgiveness, though, you may be able to escape the penalty interest rate cycle and save interest charges you would have otherwise paid.

You’ve stopped using your cards and are focused solely on repayment

One of the most overlooked signs that debt forgiveness could benefit you is that you’ve already stopped adding to the problem. If you’re no longer relying on your credit cards and are solely focused on eliminating what you owe, you’re in a strong position to complete a debt forgiveness plan and save money doing it. That’s because the strategy works best for people who are ready to close the chapter on credit card borrowing and want to start fresh, not those who want or need to keep relying on credit.

You’ve compared the total costs and forgiveness is cheaper

If you’ve explored your other options, like debt consolidation or credit counseling, and the total cost of those routes still adds up to more than a forgiveness program would, that’s a strong signal it might be the right move. The upfront impact that debt forgiveness has on your credit score may sting, but the financial tradeoff can make sense if you come out the other side debt-free and with less money spent overall.

The bottom line

Credit card debt forgiveness can be a strategic way to save money if your current debt load is costing more than it’s worth. So, if you’re stuck with high-rate balances, facing steep penalty APRs or projecting thousands in future payments just to tread water, it’s worth exploring whether you could settle for less. Before you dive in, though, make sure to understand the fees, risks and credit score implications. But under the right circumstances, the savings can be real and worth it.