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Worried about defaulting on your credit card debt? Here’s what to do
With credit card interest rates sitting at a record high of nearly 23% — and retail credit card rates surpassing 30% — many cardholders are feeling the financial squeeze. But while today’s high credit card rates are putting extra pressure on many cardholders, they’re not the only factor at play right now. After years of stubborn inflation, high consumer goods prices are also having an impact on people’s finances, making it hard for many to keep up with their growing credit card balances.
This has led to a notable increase in delinquent credit card payments recently, which is a clear indication that more people are having difficulty managing their debts. But while it might seem tempting to stop paying your credit card bills altogether when you’re in financial distress, defaulting on your credit card debt can have severe consequences.
Luckily, there are alternatives worth exploring before taking such a drastic step. If you’re at risk of defaulting on your credit card debt, you may want to consider the below alternatives before it gets worse.
Drowning in credit card debt? Compare your debt relief options now.
What to do to avoid defaulting on your credit card debt
Here’s what you may want to do before you stop paying your credit card debt.
Ask your card issuers for help
One of the first steps you should take when you’re at risk of defaulting is to reach out to your credit card company directly. If you’re upfront about your situation, many credit card issuers will work with you, as it’s in their best interest to recoup the debt rather than deal with the cost and time of collections or write-offs.
While it might feel intimidating to call a creditor, especially if you’re behind on payments, the hardship programs they offer are specifically designed to help cardholders in financial distress. The availability of these programs can vary, but they generally provide relief in the form of temporarily reduced interest rates, fee waivers or adjusted payment schedules. That could help you get back on track and avoid fully defaulting on what you owe.
Find out how the right debt relief program could help you today.
Enroll in a debt management program
Enrolling in a debt management plan through a credit counseling agency could help you avoid defaulting in certain cases. When you enroll in a debt management program, the credit counselor negotiates with your creditors on your behalf, typically to lower your interest rates or have certain fees waived. The program will also help you establish a manageable repayment plan, which typically lasts between three and five years.
A debt management program can offer much-needed structure for those feeling overwhelmed by multiple credit card payments and high interest rates. While you’ll typically be required to close your credit card accounts while in the program, sticking with it can help you avoid default and put you on the path toward becoming debt-free.
Try to consolidate your debt
Debt consolidation allows you to combine all your existing credit card debt into a single loan, ideally at a lower interest rate. This can simplify your payments and reduce the total amount of interest you’ll pay over time. And while consolidating your debt won’t eliminate it, it can make the repayment process easier by giving you a single, fixed monthly payment.
To qualify for a debt consolidation loan, you generally need a decent credit score and a stable income, so this may not be the right option for everyone — but it could provide enough relief to make your payments more manageable. This option can be especially appealing for cardholders who are dealing with multiple high-interest-rate cards and want to streamline their repayment efforts.
Negotiate a settlement
If you cannot feasibly repay your entire debt with another method, you may be able to negotiate a debt settlement (also known as debt forgiveness) with your creditors instead. This involves offering a lump-sum payment that is less than what you owe in exchange for having the remainder of the debt forgiven. While it varies, in many cases, debt settlement could cut down on what you owe by 30% to 50% — making it much easier to get rid of your credit card debt.
This option typically makes the most sense for cardholders who are facing serious financial difficulties because it resolves the debt without the long-term legal and financial consequences that default entails. That said, debt settlement should be approached with caution, as it can impact your credit score and creditors aren’t obligated to accept your offer. Settling your debt for less than you owe can also result in extra tax liabilities, as the IRS may consider the forgiven amount taxable income.
The bottom line
If you’re facing a mountain of credit card debt, defaulting may seem like your only option, but there are alternatives to help you regain control of your finances without suffering the severe repercussions of default. From hardship programs to debt consolidation and debt settlement, each option comes with its own set of advantages and considerations, so be proactive and compare your options before letting the situation get worse. The key is to find a solution before your situation spirals further so that you can preserve your financial health.
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Southwest is redesigning its cabin interiors. Here’s what the planes will look like.
Southwest Airlines is gearing up for some major changes over the next two years, an overhaul the carrier is betting will win big with passengers.
Along with more red-eye flights and a shift to assigned seating after 50 years of open seating, Southwest is redesigning the interior cabins of its 800 existing aircraft.
“This is a very significant change. It may be one of the most significant changes we’ve ever gone through,” Ryan Green, Southwest’s executive vice president commercial transformation, told CBS News’ Kris Van Cleave, who recently got a sneak peek at the future cabins.
Southwest passengers will notice the difference, said Van Cleave of the redesign. Changes include new seat trays and device trays for all passengers throughout the cabin, as well as charging ports in all of the seats.
For an additional fee, premium seating with 3-4 inches of additional legroom will also be offered on refurbished planes.
“Customers want premium of all kinds, and if you’re flying longer, that extra legroom is worth a lot,” Southwest CEO Bob Jordan told CBS News.
Southwest says it will begin booking flights with assigned seats in the second half of 2025 for travel in the first half of 2026. That’s also when the airline expects the newly designed cabins to be available, pending approval from the Federal Aviation Administration.
Jordan and other Southwest executives outlined the airline’s remodeling plans this week at an investor meeting in Dallas. The changes come as the company, long known for its loyal customers, looks to meet passengers’ evolving needs and boost its bottom line.
Said Jordan, “Consumer preferences have changed and, the way we fly has changed.”
contributed to this report.
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