Credit card balances are falling. Here's how to reduce yours now.

If you're carrying a high balance on your credit cards, there are a few strategies you can use to try and lower it now. Getty Images

After reaching a historic peak in the last quarter of 2024, credit card balances are finally showing signs of improvement across the nation. Credit card balances fell to $1.18 trillion in the first quarter of 2025, according to the latest Household Debt and Credit Report from the Federal Reserve Bank of New York, released this week, down $29 billion (2.4%) from the previous quarter. This marks a welcome reprieve for cardholders who have been grappling with record-high credit card debt since surpassing the $1 trillion milestone in 2023.

Despite this quarterly improvement, though, credit card debt remains 6% higher compared to the same period last year. That uptick in the total credit card debt year-over-year reflects, at least in part, the ongoing struggle that many cardholders are facing with carrying debt in today's high-rate environment. With credit card annual percentage rates (APRs) exceeding 21% on average, the compounding nature of credit card interest can cause significant headwinds that make escaping the debt cycle increasingly difficult. 

As a result, it's crucial for those who are carrying credit card balances to find ways to reduce their debt. Luckily, if you're among those looking to lower your credit card balances, there are several methods to consider.

Tackle your high-rate credit card debt today.

How to reduce your credit card balance now

The strategies outlined below could help you reduce your high-rate credit card balances, making it easier and more affordable to pay off what's owed:

Try and settle for less than what's owed

Debt settlement (also known as debt forgiveness) may sound extreme, but this strategy can offer big relief to borrowers who are seriously behind on payments. With this approach, the goal is to work with your creditors, typically with the help of a debt relief company, to negotiate a lump-sum payoff amount that's less than what you owe for the balance. If negotiations are successful, the settlement is paid and then the remainder of the balance is forgiven. 

The tradeoff is, however, that you typically have to stop making payments while negotiations occur (and while you're saving up for a lump-sum settlement), which can damage your credit score in the short term. Forgiven balances over $600 are also often reported as taxable income to the Internal Revenue Service (IRS), so be prepared for a possible tax bill. Still, if your credit card debt is unmanageable and you're facing collection calls or the threat of legal action, debt settlement may be a better path than defaulting or filing for bankruptcy. 

Find out how to get help from a debt relief expert now.

Consolidate multiple debts and lower the interest charges

If you're juggling multiple high-rate credit card balances, debt consolidation can be a smart strategy to lower your overall interest burden and make repayment more manageable. When you consolidate your debt, the goal is to roll multiple debts into one loan, lowering the interest and streamlining the payments. There are a few ways to do this, including:

Personal loans: You can take out a fixed-rate loan to pay off your cards, replacing multiple payments with one predictable monthly bill. Rates depend on your credit profile but are generally lower than credit card APRs.Home equity loans or home equity lines of credit (HELOCs): If you own a home with sufficient equity, you could use that to consolidate your debt. The interest rates are usually much lower, but your home is on the line if you fall behind.Transfer your balances and wipe out interest

Balance transfer credit cards are a powerful tool for debt reduction, offering introductory 0% APR periods that typically last up to 21 months. This interest-free window creates a valuable opportunity to make progress on paying down the balance without accruing additional interest.

However, be mindful of balance transfer fees, which typically range from 3% to 5% of the transferred amount. If you take this route, it's important to calculate whether the interest savings outweigh the fees and develop a clear repayment plan to eliminate the debt before the promotional period expires.

Get help from a credit counselor

Working with a credit counselor on a debt management plan can help you pay off your credit cards within three to five years on average. When you enroll in this type of program, the credit counselor will work directly with creditors to try and lower your interest rates, waive late fees and simplify your repayments.

These plans can be a great fit if you're still current on payments but are overwhelmed by interest and struggling to make progress. However, they do come with limitations: You can't open new lines of credit while enrolled, and you may be required to close existing credit cards, which could affect your credit utilization and score, initially. Still, for many, the trade-off is worth the potential downsides.

The bottom line

Falling national credit card balances are a good sign overall, but millions of households are still struggling under the weight of their high-rate debt. If you're dealing with a similar issue, it's important to weigh your options and determine whether it makes the most sense to negotiate a settlement, consolidate your balances or follow a debt management plan. Ultimately, though, the right approach is the one you can stick with, so be sure to choose the strategy that offers the most relief while aligning with your unique circumstances.

Angelica Leicht

Angelica Leicht is the senior editor for the Managing Your Money section for CBSNews.com, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.