The tough economic landscape over the last few years has resulted in a concerning trend: an uptick in credit card debt nationwide. The total amount of credit card debt in the U.S. is now $1.14 trillion — a record high — with the average cardholder owing nearly $8,000. And while various factors have contributed to the rise in credit card debt, the ongoing issues with inflation have almost certainly played a role.  

With the cost of consumer goods rising, more people have had to turn to credit cards to fill in the gaps in their budgets. But while that can make it easier to cover your expenses or manage cash flow, it can quickly spiral into a long-term financial burden. After all, the average credit card rate is currently hovering around 23%, so the compounding effect of interest on your outstanding balances can be particularly devastating. 

As interest charges pile up, you may find that the minimum payments on your card barely impact the balance. If this happens, it makes sense to explore alternative strategies for dealing with your credit card debt, like credit card debt forgiveness (also known as debt settlement) and debt management. But which approach is more effective for those struggling with high credit card balances?

Don’t let your credit card debt issues compound. Compare the best debt relief options available to you here.

Debt forgiveness vs. debt management: Which is better for high credit card debt?

If you have high credit card debt, here’s what you should know about both of these debt relief options:

When credit card debt forgiveness is better

Credit card debt forgiveness is a strategy in which you (or a debt relief company acting on your behalf) negotiate with your creditors to try and get them to accept a lump sum payment that is less than the full amount owed. If successful, the remainder of the card balance is forgiven.

While it varies, the average successful debt settlement typically ends with between 30% to 50% of the original debt amount being forgiven. In other words, if you owe $20,000 in credit card debt, you might be able to settle for between $10,000 and $14,000 with the rest of the balance written off by the credit card company. 

Given the potential to have a substantial portion of debt forgiven, this approach may be particularly appealing for those who are struggling with severe financial hardship. A debt forgiveness program can also typically be completed in two to four years, so opting for this over traditional strategies could expedite the repayment process. 

That said, there are downsides. Debt settlement typically requires you to stop making payments temporarily, which can severely damage your credit score. Any forgiven debt may be considered taxable income by the IRS, and debt settlement companies often charge significant fees (typically between 15% to 25% of the total enrolled debt) for their services.

But even with the potential downsides, debt forgiveness may be the better option if:

• You’re facing severe financial hardship with no foreseeable way to repay your debts in full.
• Your debt-to-income ratio is extremely high (typically over 50%).
• You’re willing to accept a significant hit to your credit score in exchange for potential debt reduction.
• You’ve exhausted other options and are considering bankruptcy.

Find out how debt forgiveness could help you get rid of your high-rate card debt now.

When credit card debt management is better

Debt management programs, typically offered by credit counseling agencies, involve working with your creditors to lower your credit card interest rates or fees and create a structured repayment plan. This approach aims to make debt repayment more manageable without seeking forgiveness of the principal amount owed.

The main advantage of enrolling in a debt management program is that it often results in reduced interest charges, which can make your card debt more affordable. Enrolling in a debt management plan also generally has a less severe impact on your credit. While participation in the program may be noted on your credit reports, you will continue making regular payments, which can help maintain or even improve your credit score over time. 

But as with debt forgiveness, there are downsides to consider, like a longer repayment period, as debt management plans typically take three to five years to complete. Unlike debt settlement, you’re also responsible for repaying the full principal amount — and there may also be fees tied to these programs, though they’re typically lower than the fees you’d pay for the alternatives.

In general, debt management might be more suitable if:

• You have a steady income but are struggling with high interest rates.
• You’re committed to repaying your debts in full but need more favorable terms.
• Maintaining or improving your credit score is a priority.
• You’re looking for a structured approach to debt repayment with professional guidance.

The bottom line

If you’re carrying a hefty amount of credit card debt, the “better” choice between debt forgiveness and debt management is ultimately the one that aligns most closely with your financial circumstances and goals. For some, the potential for significant debt reduction through forgiveness outweighs the credit score impact. For others, the structured approach of debt management provides a more sustainable path to financial health. But whether you choose debt forgiveness, debt management or another approach, taking action and committing to a plan is key to regaining control of your financial future.