How To Make 2026 the Year You Finally Break the Cycle of Debt

Nearly 175 million Americans carried credit card debt into the holiday season, according to TransUnion data. With balances averaging more than $6,500 and APRs hovering around 23%, clearing the ledger is on many people’s minds in the new year.

Making progress with debt can feel insurmountable, especially if you didn’t receive a raise. But getting out of debt doesn’t necessarily require a bigger paycheck, says Michael McAuliffe, president of the nonprofit credit counseling agency Family Credit Management.

“Far more important than your income is your discipline,” McAuliffe told CNBC Select. “It can be hard to stay on track. If you haven’t been keeping an eye on your statements each month, you might not feel like you’re spending more. But the debt can still be getting out of control.”

If your New Year’s resolution for 2026 is to climb out of a cycle of debt, we have six strategies to help you make it a reality.

Who’s it for? If you have multiple balances and need the boost of an early win to keep working at it. 

How does it work? The idea is to start small and grow larger, like a snowball rolling down a hill. Popularized by “The Total Money Makeover” author Dave Ramsey, the snowball method involves tackling your smallest debts first. 

For example, if you have three credit card bills:

• Credit card 1: $500 (20% APR)
• Credit card 2: $2,500 (25% APR)
• Credit card 3: $3,500 (18% APR)

Rather than trying to pay off the card with the biggest balance (Card 3) or the highest APR (Card 2), you’d target Card 1, because you could pay it off relatively quickly. The mental boost from that success, the theory goes, will push you to move onto the card with the next smallest balance, and so on, until you pay off all your bills. 

Any extra funds are being devoted to that one card, but be sure you’re making at least the minimum payments on your others.

Who’s it for? Consumers who want to pay as little in interest as possible.

How does it work? The avalanche method is similar to the snowball method, but you start with the bill with the highest APR. That way, you’re paying less in interest over the long run. 

• Credit card 1: $500 (20% APR)
• Credit card 2: $2,500 (25% APR)
• Credit card 3: $3,500 (18% APR)

Regardless of the balances, Card 2 is your first priority with the avalanche method. Paying at least the minimum on Cards 1 and 3, you put any extra funds toward Card 2, to cut down on higher interest payments.

Once you’ve paid off Card 2, you move your attention to Card 1, and then finally Card 3.

The avalanche method is more financially advantageous than the snowball method, but it requires a lot more discipline and long-term thinking.

Who’s it for? If you think your finances will significantly improve within the next year or so.

How does it work? If your credit card has a high APR, you may never make any progress on your principal balance. A balance transfer card with a 0% intro APR period pauses the clock for up to 21 months, allowing you to make payments without accruing any additional interest.

In addition to a generous zero-APR period, the U.S. Bank Shield™ Visa® Card has no annual fee and up to $600 in phone protection.

While a balance transfer can be a great tool for getting out of debt, McAuliffe offers a stern warning: Don’t look at the cleared balance as an invitation to start using your card again.

“People still have all these cards sitting there, and they say, ‘I’m just going to buy a couple of things,” McAuliffe said. “The next thing you know, they’ve charged another $800.” 

You also have to be sure you’ll have enough money to pay off the new bill by the time the intro APR period ends, or you’ll simply continue the cycle of debt.

That makes balance-transfer cards best for people who have experienced a temporary financial setback or who expect to receive a raise, an inheritance or some other windfall.

Who’s it for: People whose debt load exceeds balance transfer limits or who need a longer repayment runway.

How does it work? There are caps on how much you can put on a balance transfer card, and even the best cards only offer 0% APR period for 21 months. If you haven’t paid the full balance by then, the rate could skyrocket.

You can take out a debt consolidation loan for a much larger amount (SoFi approves loans up to $100,000) and receive a term of up to 120 months, depending on the lender.

The APR is fixed, so payments are more predictable and, in many cases, your lender will pay your creditors directly on your behalf.

The same discipline you need for a balance transfer card applies to a debt consolidation loan, according to McAuliffe. 

“Focus on behavior modification,” he said. “We tell people all the time, You can do this, but you have to close the card.'”

Who it’s best for: Anyone who’s tried other strategies but is still unable to chip away at major debt.

A credit counseling agency, also known as a debt management company, will review your debts, your income, employment history and other factors and work with your creditors to figure out how much you can afford to pay. 

They can’t erase debts completely, but unlike debt settlement, your credit score won’t be damaged. So, if you owe $20,000 across three credit cards with an average APR of 22%, a credit counselor can’t change that $20,000 balance. But they could get your card issuers to lower their interest rates. 

If you’re putting down $400 a month on a $20,000 debt, a 22% APR means it will take you up to 142 months to pay off the total, by which time you will have racked up more than $35,000 in interest.

If the credit counselor talks your card issuer down to a 7% APR, however, that same $400 monthly payment will pay off your balance in just 60 months, with just over $3,700 in interest.

Many credit counseling services are nonprofit but most still charge for their services. Money Management International, for example, has a one-time setup fee of $38 and an average monthly fee of $27.

Who it’s best for: Anyone who has already defaulted on some debts or is looking to negotiate a lower balance.

A debt relief (or debt settlement) company works with your creditors to accept a payment that’s less than the original balance. The main difference from a credit counseling agency is that debt relief companies usually advise you to stop paying your bills while they negotiate. That can torpedo your credit score, but if you’re deep enough in the red, it could be worth the hit.

Fees for debt relief are also much higher than for credit counseling, usually between 15% to 25% of the enrolled balance. So, if you enroll with $10,000 in credit card bills, you could end up owing as much as $7,500 — $5,000 to your creditors and $2,500 (25%) to the settlement company. 

Most debt relief companies require clients to have at least $10,000 in unsecured debts, but Freedom Debt Relief’s floor is only $7,000. It’s also earned top customer service scores from the Better Business Bureau and Trustpilot.

There is no guarantee the negotiations will be successful, however. Your creditors could tack on more interest and fees, send your account to collections or even pursue legal action.

There are also tax implications, as forgiven debt is typically treated as income by the IRS.

While millions of people have successfully used debt relief programs, they’re often viewed as a last resort.

Whatever route you take to tackle debt in 2026, you should accept that you might not finish the journey in the next 12 months. At the same time, make sure you’re reevaluating your relationship with spending, or you could be right back here in 2027. 

“Be very mindful of how much you owe,” McAuliffe said. “What are your monthly bills? Are they staying the same or going up? Things cost more, and your balance can shoot up without you really noticing.”

At CNBC Select, we work with experts who have specialized knowledge and authority, built over years of relevant training and experience. For this article, we spoke with Michael McAuliffe, president of Chicago-based Family Credit Management. 

Michael has been at Family Credit Management since 1996. He previously worked in consumer lending at Mid-America Federal Savings Bank and Great American Federal. He earned a Bachelor of Arts from Concordia University Chicago and a Master of Science from Abilene Christian University.

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