How much does debt settlement cost?

Total U.S. credit card debt stood at a near-record $1.25 trillion in Q1 2026, according to New York Fed data. As average APRs on new cards exceed 23%, serious, long-term delinquencies (90+ days) have risen to 13.12%, their highest levels in 15 years.

If you're struggling to keep up with credit card bills or other unsecured debt, a debt settlement company may be able to reduce your balances and simplify your payments. These services, also known as debt relief companies, negotiate with your creditors on your behalf to settle your debts for less than the full amount owed.

Many debt settlement companies claim they can reduce your enrolled debt by up to 50% — but that's before you pay their fees.

Knowing whether debt settlement is the right step for you depends on understanding all the costs involved.

Beyond what you have to pay your creditors, there are a number of costs associated with debt settlement.

Settlement fee

The biggest expense associated with debt settlement is the settlement fee, which the company charges for successfully negotiating with your creditor.

Most charge a fee equal to 15% to 25% of the total balance you enrolled. So, if you come with $25,000 in credit card debt and get all your balances successfully settled, your fee would likely be between $3,750 and $6,250.  

States regulate how much debt settlement companies can charge, so the percentage you’re assessed largely depends on your state’s fee cap (in some cases, the size of your debt and other factors play a part, too). 

It doesn’t matter where the debt was incurred, only your current state of residence.

“If you incurred debt in Texas and later moved to New Mexico, for example, you’d be enrolled under New Mexico’s rules, based on your current address,” said Brit Simon, chief experience officer at National Debt Relief (NDR), which provides debt settlement services in 45 states and Washington, D.C.

Account fees

A debt settlement company will typically have you make monthly deposits into a dedicated savings account and use the money in it to pay both the settlement fee and your creditors. The setup fee for this account can be anywhere from $10 to $50 and monthly maintenance fees can range from $5 to $10.

If it takes you four years to complete a debt settlement plan, that’s between $250 and $530 in account fees.

Some states prohibit these fees, and there are settlement companies that will allow you to avoid the charges by setting up and managing your own account.

Not all debt settlement companies are transparent about fees, so ask before signing up. 

Indirect costs

There are also indirect costs to debt settlement. Most companies ask clients to stop making payments to their creditors before the negotiations start. If a creditor refuses to settle, that means additional interest, late fees and increased damage to your credit score.

The IRS may also consider the debt forgiven by your creditors as taxable income, which could impact your refund or your tax bracket.

In most cases, debt settlement companies base the percentage they charge you on the total amount of debt you enrolled with them.

Imagine you had $10,000 in credit card debt — $8,000 on one card and $2,000 on a second. If you signed up with a settlement company that charged a 25% settlement fee, you could expect to pay $2,500. 

Federal Trade Commission requirements prevent debt settlement companies from requiring their fee before they've successfully negotiated a reduction on a specific debt and you’ve made at least one payment toward the plan.

If you’re being asked to pay up front, it’s a good sign you’re being scammed.

“We don’t take our fee until the customer says, ‘I like this settlement and I approve it,” said NDR's Simon. “Then the funds from their savings account are used to pay the settlement [fee] and we start the process of paying the creditor.”

Many debt settlement companies report that they reduce enrolled balances by an average of 40% to 50%. After deducting their settlement fee and other charges, the net savings typically range from 20% to 25% of the original balance.

According to Simon, for example, National Debt Relief clients have an average of 45% of their enrolled debt forgiven. So, if you enrolled $10,000 with NDR, you could potentially have $4,500 wiped out and owe only $5,500.

Assuming a 25% settlement fee, you’d have to pay NDR $2,500 for its services. But you’d still come away with $2,000 in savings, maintenance fees and other charges notwithstanding.  

Yes, it's uncommon, but debt settlement fees and other program-related charges can exceed the amount you save if a company is unable to negotiate significant reductions with your creditors.

Freedom Debt Relief's program guarantee protects clients against that eventuality: If your total program costs exceed the dollar amount you enrolled, you’ll be refunded the difference, up to 100% of the collected fees. 

To determine whether debt settlement will provide a meaningful financial benefit, compare a company's estimated fees against its projected debt reduction before enrolling.

Anyone can try working with lenders or creditors on their own, but debt settlement companies point to the complexity of the situations their clients face. 

Most are trying to pay off at least six to eight accounts, according to Lou Antonelli, chief operating officer at Beyond Finance, which offers debt settlement services through Accredited Debt Relief.

“You have to try to juggle all those calls, figure out your budget, save the money and make all the right choices along the way,” Antonelli told CNBC Select. “We can look at the situation holistically and, based on creditor behavior, understand the most strategic way to operate, from account one to account eight.”

Settlement companies also benefit from years of forging relationships with creditors — of knowing which ones will settle and, likely, for how much. 

“We have the process and the experience — that's our core value proposition,” said Simon. “And we’re involved in getting customers through this program. There's a lot of coaching and financial guidance, too.”

Correction: This article has been updated to indicate that National Debt Relief serves 45 states and Washington, D.C. An earlier version incorrectly listed how many states the company operates in.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every debt relief article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of debt relief products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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