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With the federal funds rate paused at a 23-year high, borrowing costs are up. And, since rates are high on credit cards, you may have seen theinterest charges on your credit cardballoon recently.
If higher credit card payments are impacting your budget, credit card debt forgiveness could make sense. These services typically negotiate with your credit card companies to settle your debts for less than you owe.
But credit card debt forgiveness isn’t for everyone. For some, the tax implications andpotential impact on credit scores mean these programs aren’t worth what they can provide. But when does credit card debt forgiveness make sense and when should you consider other options?
Find out how a debt forgiveness program can help you pay off your credit cards today.
3 times credit card debt forgiveness makes sense (and 2 times it doesn’t)
If you’re dealing with high-interest credit card debt, here are three times forgiveness programs could make sense — and two times they may not.
3 times credit card debt forgiveness makes sense
While there are some potential consequences of taking this route, credit card debt forgiveness may be worth it in some situations, including:
When you can’t afford to make your minimum payments
If you’re struggling to make your minimum payments, a credit card debt forgiveness program could help. These programs work to negotiate lower credit card balances on your behalf, soyou may, in turn, see lower monthly paymentsas a result.
Tap into credit card debt forgiveness now.
When you’re worried about being unable to pay off your credit cards
If you’re only making minimum monthly payments, it can feel like you’re making little headway. That’s because the minimum payments on your credit cards primarily go toward interest, leaving little to go toward your principal balances. That’s why some credit card debts can take decades to pay off.
And, if you’re feeling trapped by credit card debt, it may be time to consider debt forgiveness. These programs typically help borrowers pay off debt a lot faster than they would by making minimum payments alone.
When you have little cash left over at the end of the month
Do you have to sacrifice the small things to make your credit card payments? Or do you have to seriously consider the budgetary impact of minor expenses, like streaming services, before signing up? If so, it may be time to consider credit card debt forgiveness.
There’s a difference between frugality and an inability to afford the simple things. If your credit card debt has caused the latter to occur, debt forgiveness may be worth it.
2 times credit card debt forgiveness doesn’t make sense
Credit card debt forgiveness programs aren’t a one-size-fits-all solution to credit card debt. In certain cases, it may be better for you to seek other debt-relief options, including:
When you can afford your minimum payments
If you’re able to fit your credit card payments into your budget, the consequences of debt forgiveness could outweigh the benefits. In these cases, it may help to consider other options, like credit card debt management programs or debt consolidation loans. These options may have a lesser impact on your credit score and generally don’t have tax implications.
When you have low credit card balances
Most credit card debt forgiveness companies require borrowers to owe a certain amount of money to qualify for debt forgiveness services. For example, you need at least $7,500 in credit card debt to enroll in Freedom Debt Relief’s debt forgiveness program.
If you have relatively low credit card balances but are still struggling to make your minimum payments, it may help to reach out to your credit card companies directly. They could be willing to help you with an in-house financial hardship program.
The bottom line
Credit card debt forgiveness may or may not make sense in your situation. If it’s difficult to make your minimum payments and you don’t see a way to pay your debt off within the next few years, debt forgiveness may make sense. On the other hand, if you can easily make your payments or have a low amount of debt, you may want to look into other debt relief solutions instead.
Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he’s not working, he enjoys time with his wife, two kids and two dogs.
