Some Gen Z credit card users are maxed out: 5 debt relief options to consider
Credit card debt is an ongoing issue for many Americans, and under the weight of today's economic challenges, these types of issues are compounding. For example, about one in seven (or 15.3%) of Gen Z credit card users have maxed out their credit cards, according to recent research from the New York Fed. But it's not just Gen Z that is struggling. Almost one in five credit card users overall are maxed out, and nearly 9% of credit card debts were considered delinquent in Q1 2024.
These credit card statistics are indicative of the significant economic challenges many people are facing in an increasingly expensive world, one of which is persistently high inflation. While inflation is down from the over-9% levels that occurred in mid-2022, today's 3.4% inflation rate is still too high, and prices for essentials like food, rent and gas remain elevated. Further compounding the issue are the elevated interest rates meant to combat inflation, which directly increases the cost of carrying a credit card balance from month to month.
As these everyday expenses mount, more and more people find themselves forced to rely on credit to make ends meet, inadvertently falling into a deepening cycle of debt. And, given the severity of the situation, many maxed-out borrowers are now looking for strategies to escape the burden of overwhelming credit card debt.
Learn more about how the right debt relief company can help you now.
5 debt relief options to consider
There are numerous potential debt relief options available to you if you're dealing with maxed-out credit cards, including:
Debt consolidation loans
One approach that may be worth considering is to take out a debt consolidation loan from a bank, credit union or online lender. With this method, you use the debt consolidation loan to pay off all of your existing credit card balances. This consolidates multiple credit card payments into a single fixed monthly payment that goes toward paying off the new loan, ideally at a lower interest rate than your credit cards had.
By consolidating multiple credit card balances into one loan, your total interest costs are reduced over the repayment period. This makes the debt cheaper and easier to pay off what you owe each month. Having a single payment can also make your debt payments easier to budget for.
Compare your debt relief options and get started today.
Debt consolidation programs
A debt consolidation program works similarly to a debt consolidation loan, but rather than borrowing through a traditional financial institution, you work with a debt relief company to obtain a debt consolidation loan instead. With these programs, you typically borrow money from the debt relief company's lender partner to bundle your credit card debts into a single streamlined payment.
By taking out a debt consolidation loan through a debt consolidation program, you'll typically get a lower interest rate compared to your credit cards. In turn, the total interest costs are reduced over the repayment period. This makes your debt easier, and often cheaper, to pay off over time.
Debt management plans
When you enroll in a debt management plan with a debt relief company, the experts you work with negotiate concessions like reduced interest, waived fees and combined payment schedules with your creditors. You then make a single payment to the agency each month, which then distributes that payment among your creditors. This creates a structured, closed-end repayment plan designed to be affordable for your situation. In many cases, it also makes it possible to pay off the total debt you owe in three to five years (on average).
Debt settlement
Debt settlement programs are typically offered by debt relief companies and the goal of these programs is to settle your debt for less than the total balance owed. When you enroll in a debt settlement or debt forgiveness program, you generally stop making payments to creditors and send monthly payments to the debt relief agency instead. These payments are held in an account, and once a significant amount has accumulated, the debt relief experts will attempt to negotiate lump-sum settlements with each creditor for a fraction of what is owed.
However, it can also have severely negative credit impacts on your credit, both during the settlement process and after, as the late payments will affect your credit score — and the debts will show that they were settled for less than owed on your credit report. Still, for those who can't afford their minimum payments, this option provides a path out of debt in an expedited time frame.
Balance transfer credit cards
If you have decent credit, you may be able to open a new balance transfer credit card, which allows you to transfer existing high-interest balances to a new card with an introductory 0% APR period. This interest-free window provides breathing room to pay down principals before regular interest rates kick in, but you'll have to be disciplined about your payments to ensure that you pay it all off during the interest-free (or low interest) window.
The bottom line
Right now, millions of Americans are struggling under the weight of maxed-out credit card balances. If you're one of them, you can get help, whether that's opting for debt settlement, consolidating your debt, enrolling in a debt management program or using a balance transfer card to cut down on the interest charges temporarily. But no matter which route you take, today's economic headwinds make it important for you and others facing mounting credit card balances to be proactive and explore your debt relief options in order to find firmer financial footing.
