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A version of this article first appeared in “CNBC’s Money 101 newsletter with Sharon Epperson,“ an eight-week series with monthly updates to help improve your financial well-being. Sign up to receive the series, straight to your inbox. It is also available in Spanish.
Mounting debt has been hindering savings for many Americans.
About 71% of U.S. adults surveyed say monthly debt payments prevent them from building wealth or savings, according to a recent survey by the National Foundation for Credit Counseling. The NFCC survey of 2,010 U.S. adults was conducted by Harris Poll this spring.
Federal Reserve Bank of New York data shows credit card balances reached a collective $1.21 trillion in the second quarter of 2025 — up 2.3% from the previous quarter and in line with last year’s all-time high.
“It’s a reality of where we are,” said Rod Griffin, senior director of consumer education at Experian. “Some of it is a lack of knowledge and understanding of how credit works. Some of it is, in some cases, just our desire to have stuff, and some of it is the reality of the financial world we’re living in right now.”
While reducing debt is a top priority for many Americans this year, according to a survey by the CFP Board, most respondents have not been taking advantage of programs and strategies designed to provide relief, such as debt consolidation. The CFP Board polled 806 adults in October 2024.
Here are five steps experts say you can take now to evaluate your options:
1. Know where you stand
Creating a budget is step one. Review credit card bills, invoices and other receipts. Gather details of your debts, including your outstanding balance, your minimum or required monthly payment and the interest rate on the debt. Then gauge how those fit into your cash flow.
“Understand what you can afford, and what you can not afford to pay,” said Mike Croxson, CEO of the NFCC, a member organization of 50 nonprofit credit counseling agencies.
2. Ask for a lower interest rate
See if your credit card issuer or lender will negotiate your interest rate. Most credit card holders — 83% — who asked for a lower rate in the past year received one, according to a recent LendingTree survey.
However, experts say even with a lower rate, you must be disciplined in making timely payments that exceed the minimum amount due to ensure you pay off the balance more quickly and avoid incurring additional debt.
3. Explore consolidating balances
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If you qualify for a credit card that offers a promotional 0% interest rate for a specific period, you can consolidate and pay off higher-interest debt with that card.
Aim to pay off the balance in full before the promotional rate ends. If you transfer a $6,000 credit card balance to a card with a 0% interest offer that lasts 15 months, for example, divide the balance on the new card by 15 and make payments of $400 a month to pay off the entire balance before the introductory offer expires.
You can also consider taking out a personal loan to consolidate your debt. The average credit card interest rate is 20%, according to Bankrate. That’s higher than the average personal loan interest rate of 14.48% for consumers with good credit (a credit score of 690 to 719), according to NerdWallet.
4. Learn how debt settlement companies work
Do not commit to a debt settlement program until you’ve weighed your options, experts say.
If you enroll in a debt settlement program, you may be instructed to stop communicating with creditors and withhold payments while the company attempts to negotiate. This can be a risky move — accounts aren’t always settled as hoped, which could leave you in a worse financial position, some experts say.
The debt settlement process may result in lower interest rates or reduced payment terms in exchange for reporting debt as paid, but “it may be as paid settled or paid settled for less than originally agreed, and that settlement is going to be very detrimental to your credit score,” said Experian’s Griffin.
Creditors may also charge off the debt, write it off as uncollectible and send it to a debt collection agency, which could sue you for the money, according to the Consumer Financial Protection Bureau. There may also be hefty settlement company fees, and you may have to pay tax on forgiven debt.
5. Consult a nonprofit credit counselor
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A credit counselor typically asks you to complete a comprehensive financial review to help you evaluate your options.
“When you work with a credit counselor, they’re first going to work with your budget, look at your income sources, where your debts are, and work with you to find, potentially, a way to repay them,” said Griffin. “Then, [they] help you manage your finances going forward so you don’t find yourself in the same situation.”
The counselor may recommend a debt management plan.
Unlike a settlement program, a debt management plan is designed to help you repay your debt in full through reduced payments and lower interest rates, without penalties or fees from creditors. Debt management plan fees average about $35 a month, according to the NFCC.
By making monthly payments, the debt is typically resolved within four to five years, experts say, which is similar to the time frame for the debt settlement process. However, experts say that a debt management plan generally has a less negative impact on your credit score, as your debt is repaid in full.
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