3 big reasons to pursue credit card debt forgiveness this January

As we step into the new year, many Americans are grappling with the financial aftermath of holiday spending layered on top of existing credit card debt. The uptick in spending isn't the only economic issue that's looming, either. While inflation has cooled compared to recent highs, it's been rising in recent months and has continued to increase the cost of everyday expenses. Credit card interest rates are also sitting at historic highs, furthering the pressure on many people's budgets — especially those with high-rate credit card debt.

Luckily, there are some debt relief solutions to consider for those facing overwhelming amounts of credit card debt. One such option is credit card debt forgiveness, also known as debt settlement, which involves working with creditors to settle your debts for less than what's owed. While this option can impact your credit score in the short term, it can provide serious relief for those trapped in a cycle of high-rate debt payments.

If debt forgiveness sounds like it could be a good solution to your credit card debt issues, there are a few reasons you may want to pursue it this month in particular. 

Learn what debt relief options are available to you now.

3 big reasons to pursue credit card debt forgiveness this January

Here's why January could be the ideal moment to take action and pursue credit card debt forgiveness:

Credit card rates are likely to climb in 2025

Credit card rates have been on a steady upward trajectory over the last few years — and given that trend, it's unlikely that we'll see these rates decrease in 2025. While there have been recent Federal Reserve policy shifts, with the Fed slashing its benchmark rate three times in late 2024, these rate decreases have had virtually no impact on credit card rates so far. 

With average card rates now hovering above 23%, cardholders face unprecedented costs on their balances. For perspective, carrying an $8,000 balance — the current national average — could result in paying over $1,600 in annual interest charges when making only minimum payments. This means that nearly half of your monthly minimum payment might be going toward interest rather than reducing your principal balance.

Given the ongoing rate trends, it's also likely that credit card rates could continue to rise throughout 2025, especially since banks tend to adjust their risk management strategies in response to changing economic conditions. This would make it increasingly difficult for cardholders to make meaningful progress on their debt through traditional payment methods. So. if you're carrying a significant amount of card debt currently, it makes sense to consider whether settling your credit card debt now could be the appropriate solution. 

Take steps to get rid of your high-rate card debt today.

You may be relying more heavily on your credit cards right now 

Recent economic data revealed a troubling trend: Consumer credit card debt increased from $1.14 trillion to $1.17 trillion from the second quarter to the third quarter of 2024. This surge reflects the growing dependence on credit cards to cover essential expenses amid persistent inflation and rising costs of living. 

The pattern becomes particularly concerning when considering that many cardholders are using credit cards not just for discretionary purchases but for basic living expenses. This shift from credit cards being a convenience tool to a necessity for survival can quickly lead to unsustainable debt levels. And, given that the cost of living has not declined, even as inflation has cooled, it's likely that the trend could continue throughout 2025. That makes it crucial to address your existing debt before it becomes even more challenging to manage.

Compound interest charges can cause big issues over time 

The compounding effect of high-rate credit card debt creates a particularly dangerous financial trap that becomes more severe the longer it persists. When you carry a balance, interest charges are added to your principal, meaning you'll pay interest on your interest in subsequent months. This snowball effect can quickly transform manageable debt into an overwhelming burden that becomes increasingly difficult to escape from.

For example, if you have a $10,000 credit card balance at the current average APR of 23%, and you only make minimum payments (typically 2% of the balance), it would take decades to pay off the debt completely. During this time, you would end up paying thousands of dollars in interest charges alone. This demonstrates how compound interest can drastically increase the cost of your original purchases over time.

By settling your credit card debt now, though, you'll be able to move forward without the effects of compound interest driving up your debt even further. That, in turn, can make it a lot easier to manage your finances, provided that you avoid accruing more debt after you've settled what you currently owe.

The bottom line

The path to credit card debt forgiveness requires careful consideration and commitment, but the potential benefits – including reduced balances, lower monthly payments and freedom from crushing interest charges – make it a compelling option for many cardholders this January. By taking action now, you can position yourself for improved financial health throughout the coming year and beyond.

If you plan to pursue debt forgiveness, though, it may benefit you to work with reputable debt relief companies who can guide you through the process. These professionals can help negotiate with creditors on your behalf and develop a structured plan to resolve your debt. While the journey to debt freedom may take time, starting the process in January gives you the opportunity to make 2025 the year you take control of your financial future.