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Credit card debt is a growing problem for many Americans. Credit card balances increased by $27 billion in the second quarter of 2024 and are up almost 6% compared to a year ago.
If you’re one of the millions struggling to pay off your credit card debts, you might consider debt relief. While this comes in many forms and can be helpful — and even save you money — when used properly, the industry is also rife with issues. Scams are common, and if you’re not careful, you could end up worse off than when you started.
“Unfortunately, when people are overwhelmed by debt and no longer can manage their payments, they become desperate and vulnerable,” says Cynthia Campos Delgado, founder and financial advisor at Campos Wealth Management in McAllen, Texas. “Companies offering to relieve them of that stress come out of the woodwork, but not all of those have good intentions.”
Are you looking for ways to tackle your debt? We asked some experts for ways to avoid debt relief scams along the way.
Start by exploring some top debt relief companies here now.
How to avoid debt relief scams, according to experts
Want to use the services of a debt relief company but are hesitant about potential scams? Here’s how experts suggest you get the help you deserve while also protecting yourself.
Watch for upfront fees and pushy sales tactics
The first thing you can do is be aware of how a company initially reaches out. Unsolicited phone calls are a big red flag, says Annie Cole, a financial coach at Money Essentials for Women, especially if “the organization is pressuring you to make a decision to work with them quickly or while on the phone call.”
Charging an upfront fee — before any work is ever done — is another common indicator you might be getting scammed.
“Reputable debt-solving companies will always give you a free, in-depth debt analysis,” says Howard Dvorkin, chairman of Debt.com.
If you still want to work with them after that analysis, you’ll typically pay a fee based on how much debt is enrolled in their services.
Get started with a reputable debt relief company online today.
Beware of big claims and advertisements
You should also be wary of any unrealistic claims from debt relief companies. As Dvorkin puts it, “Never believe ads that guarantee to get rid of all your debts.” While debt relief companies can help you tackle your debts — and even reduce what you pay in some cases — they can’t get rid of your debts completely (unless you opt for bankruptcy).
If a company offers complete debt elimination “that is a clear sign to look more closely,” Delgado says. “The famous line ‘If it sounds too good to be true, it probably is’ applies to this scenario.”
Do your research
Finally, do your research before working with a debt relief company. Dvorkin recommends checking online reviews, the Better Business Bureau and professional associations. You can also research their history as a business.
“Have they been around for at least a decade?” Dvorkin asks. “The longer they’ve been in business, the more likely they’ve done a good job.”
Cole also says to research a company’s online presence. If it lacks a credible-looking one or doesn’t clearly explain its debt relief processes or fees, then that’s a sign something may be amiss.
Know your options
Before reaching out to a debt relief company, know what options you might have to explore. If you have lots of credit card debt, for instance, a debt consolidation may be an option. This can roll all your debts into one lower-rate loan, often saving you significantly on interest costs. You likely won’t need a debt relief professional if you choose this route.
You can also contact your creditors. Some may be willing to work with you to get the debt repaid.
“Work directly with the organization where you owe debt,” Cole says. “Call a representative to ask about payment plans, reducing the overall bill, or reducing or pausing the interest growth.”
Last but not least, look into credit counseling. A credit counselor can teach you about budgeting, help you determine the best strategy for repaying your debts and educate you on debt management. “Equipping yourself with education is the best first step,” Cole says.