When credit card debt forgiveness is worth it (and when it's not), according to experts

Credit card debt is an all-too-common problem. Nearly half of credit card accounts in the US carry a balance from one month to the next, according to the Government Accountability Office. For those who find themselves in this situation, it can be difficult to climb out of this hole and get back to paying off your credit cards in full every month. Issues like high inflation squeezing budgets and high interest rates that are making debt more expensive have caused some Americans to feel like they can't get out of the red.

When that happens, you might consider trying to obtain credit card debt forgiveness. Debt forgiveness can take shape in a few different ways, but it's important to note that credit card debt forgiveness generally isn't something that you can just call up a credit card company about.

"Rarely will a credit card company simply take less than they are owed just because a consumer asks them to do that. Rather, they are more likely to lower your interest rate, reduce fees, or offer a temporary period of lower monthly payments," says Jordan Rippy, associate professor of accounting at the Johns Hopkins Carey Business School.

However, there can be ways to reduce the amount you owe, such as with the help of a third-party debt relief service that negotiates on your behalf or declaring bankruptcy. Doing so might save you money in the short term, but it can also be damaging to your credit, so it's important to weigh the pros and cons.

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When credit card debt forgiveness is worth it (and when it's not), according to experts

Here, we'll examine some scenarios where credit card debt forgiveness could be worth it, as well as some times when there are likely better alternatives.

When credit card debt forgiveness is worth it, experts say

In certain cases, credit card debt forgiveness is worth it, like in situations where you're in too big of a financial hole to climb out of it using other means.

"A debt forgiveness or debt reduction path is worth it when you have realized that the situation is out of control and you aren't sure how to plot a path back to control," says Rippy.

While this issue of control is subjective, you might consider your ability to make the minimum monthly payments due on your credit cards.

"If you aren't able to make your monthly payments on all of your cards, that's a big clue that your situation has gotten out of control. But, even if you are able to make your monthly payments, you will still be accumulating lots and lots of interest if all you can do is make monthly payments, so if you can't really, truly see a path forward to paying off all of your credit card debt, seeking some outside help to understand your options is worth it," adds Rippy.

And, while credit card debt forgiveness options can damage your credit for multiple years, it could be worth it when considering the alternatives.

"Negotiating a balance reduction and settling the debt is still a better option than defaulting altogether or not being able to pay any of your bills and causing greater chaos across your entire credit profile," says Daniel Cohen, founding partner of Consumer Attorneys.

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When credit card debt forgiveness isn't worth it, experts say

While credit card debt forgiveness can help you recover from difficult financial situations, it might not be worth damaging your credit for several years if you can instead find alternative debt help.

"Debt settlement isn't worth it if you can reasonably afford to manage your financial situation in any other way. If just balance shifting or loan consolidation can do the trick, it's not worth damaging your credit score with debt settlement," says Cohen.

"The idea of not having to pay a sizable portion of your credit card debt can be enticing, but it shouldn't be done hastily, treated lightly, or viewed as a get-out jail-free card," he adds.

For one, you can hurt your credit to the point where it gets more expensive or impossible to get other loans for the following several years, such as for a car or home. You also run the risk of digging yourself into a deeper hole, such as if you're using an ineffective credit card debt relief service that unsuccessfully tries to negotiate your debt while causing you to incur more late fees and interest.

To find a reputable debt relief company that can help find the best solution, be sure to see what others have to say.

"Read customer reviews. Learning from others' experiences can often be helpful in this regard," says Bob Welch, SVP, financial advisor at Wealth Enhancement Group.

The bottom line

Credit card debt forgiveness, such as through a debt relief company that negotiates on your behalf, or by filing for bankruptcy, could be the right solution for those significantly struggling to manage their debt. However, others who have more manageable situations benefit from other forms of debt relief, like debt consolidation or working out a repayment plan.