8 Ways to Consolidate Credit Card Debt 

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Debt consolidation allows you to take multiple debts and combine them into one, and you can do this with your credit card debt. Doing this makes managing the debt a little easier, and you may be able to get a lower interest rate.

Keeping track of multiple credit card bills can be difficult and potentially cause you to fall behind on payments or forget them altogether. Since payment history is the most important factor that influences your creditworthiness, not making payments on time can damage your credit score. 

If you’re struggling to juggle multiple bills, you may want to consider credit card consolidation. Read on to discover eight ways to consolidate your credit card and evaluate the pros and cons of each method to find the best option for you. 

Key takeaways: 

  • Credit card consolidation involves combining multiple credit card balances into one. 
  • Types of credit card consolidation include credit card consolidation loans, balance transfer credit cards, home equity loans, HELOCs, retirement loans, cash-out auto refinance, family loans, and debt management plans. 
  • The advantages of credit card consolidation include lower payments, faster debt payoff, and fewer bills to keep track of. 
  • Consider your financial situation when weighing the pros and cons of each credit card consolidation method. 

Table of Contents: 

  • What Is Credit Card Consolidation?
  •  How to Consolidate Credit Card Debt
  • Credit Card Consolidation FAQ

What Is Credit Card Consolidation?

Credit card consolidation is a debt management strategy that combines different credit card balances into one.

How Does Credit Card Consolidation Work?

You can go about consolidating credit card debt in a few different ways. Generally speaking, you will take out a loan or credit card with a lower interest rate and pay off all current balances with money from the new account. Once the debt is consolidated into one loan or credit card, you can begin paying off this account. 

How to Consolidate Credit Card Debt

The best way to consolidate credit card debt depends on your individual financial situation, as each option has its own advantages and disadvantages. Below are eight ways to consolidate credit card debt that you may want to consider.

Credit Card Consolidation Loans 

A credit consolidation loan is a type of unsecured personal loan that comes with a set repayment period and fixed monthly payments. You’ll receive an amount of money that you’ll use to pay off your current debt. 

For a credit card consolidation loan to make sense, the interest rate needs to be lower than the interest rate for your credit cards. Most personal loans are fixed rate, so you don’t have to worry about the interest rate increasing. Keep in mind that some lenders charge an up-front, one-time origination fee ranging from 1% to 10% of the total loan amount. 

To get a credit card consolidation loan, take the following steps: 

  • Step 1: Research lenders, such as credit unions, banks, or online lenders. Since credit unions are not-for-profit institutions, they typically offer the best rates, especially for individuals with poor credit, although you need to become a member to apply. Banks, on the other hand, generally require a good credit score to qualify. Make sure to consider loan terms, rates and fees. 
  • Step 2: Get prequalified with a couple of lenders. Some lenders can prequalify your application to see what rates you qualify for so you don’t get hit with a hard inquiry that could potentially affect your credit score. 
  • Step 3: Decide on a lender and apply. You’ll likely need to submit personal information like proof of your identity and income. After you apply for the loan, the lender will decide on final approval. 
  • Step 4: Receive the loan and pay off your credit card debt. Once you receive the funds, you’ll use the money to pay off your credit card debt. On the other hand, some lenders will directly pay creditors, which removes the hassle on your end. 


  • You can get low interest rates if you have good credit. 
  • A fixed interest rate keeps your monthly payments constant. 
  • The lender may pay your creditors directly. 
  • It can help significantly lower your credit utilization.


  • You must have a good credit score to qualify for lower interest rates. 
  • You’ll need to pay origination fees. 

0% APR Balance Transfer Credit Card

This debt consolidation option involves transferring your debt to a credit card that offers a 0% APR introductory period, typically lasting between 12 and 21 months. During this time frame, you won’t be accruing credit card interest on your debt, allowing you to pay down your balance quicker and save money. With balance transfer credit cards, the goal is to pay down your entire balance within the introductory period. 

While many balance transfer credit cards don’t charge an annual fee, there is typically a one-time balance transfer fee that ranges from 3% to 5% of the total amount you transfer. For example, if the company charges a 3% balance transfer fee and you transfer $600, you’ll be charged $18 in fees. To ensure this option makes sense for you, calculate how much interest you’ll save over time to verify it cancels out the cost of the fees.  

It’s also important to consider the card’s interest rate following the introductory period in case you don’t pay your balance off within the 0% APR time frame. 


  • It provides you the opportunity to pay off debt without accruing interest. 
  • It gives you a year or more to pay down your balance.


  • It requires good credit for eligibility. 
  • You’ll need to pay balance transfer fees. 
  • The APR increases after the introductory period. 

Home Equity Loans

If you’re a homeowner, you can take out a home equity loan, which involves borrowing money against the equity in your house. With this method, you’re essentially taking out a secured loan and using your home as collateral. 

The main benefit of a home equity loan is that it typically offers lower interest rates than personal loans. However, since the loan is secured with your home, your property could get foreclosed on if you fall behind on payments. Additionally, you may have to pay closing costs when taking out a home equity loan, typically 2% to 5% of the loan amount. 


  • They come with lower interest rates than other loan types.
  • They offer a long repayment period.


  • You must be a homeowner to qualify. 
  • Your home could be foreclosed on if you fail to repay the loan. 
  • You’ll need to pay a second mortgage that will likely have a higher interest rate. 
  • You’ll need to pay closing costs. 

Home Equity Lines of Credit (HELOCs)

Similarly to a home equity loan, a HELOC uses your home as collateral to secure a loan. While home equity loans provide a lump sum, HELOCs work like a revolving line of credit with variable interest rates. This means that the payment amount could vary from month to month. With a HELOC, you have continuous access to money for a period of time, and you can take out as little or as much as you need. 


  • They have lower interest rates than other types of loans. 
  • You have the ability to choose how much of your credit line to use. 


  • Variable interest rates may make budgeting more difficult. 
  • There is a possibility of home foreclosure if you fall behind on payments. 

Cash-Out Auto Refinance

A cash-out auto refinance works similarly to a regular auto loan while allowing you to borrow additional money. For debt consolidation purposes, you can use this money to pay off your credit cards. Keep in mind that you could lose your vehicle if you fail to repay the loan. 


  • You have the opportunity to receive a lower interest rate on your car loan. 


  • You may lose your vehicle if you don’t make payments. 
  • You’ll need to pay title, lender, and closing fees.

Retirement Account Loans 

If you’ve been contributing to an employee-sponsored retirement plan such as a 401(k), 403(b), or 457(b), you can borrow against your savings and use the money to pay off your credit card debt. Since retirement account loans typically have lower rates than credit cards, this route could significantly lower the amount of interest you pay to creditors. 

Before taking out a retirement loan, it’s important to understand how it will impact your savings. Even though you’ll pay the money back within five years, you’ll lose out on tax-free earnings. 

If you leave your current job, you’ll likely have to pay back the loan immediately or within a short period. 


  • They have lower interest rates than credit cards. 
  • There is no credit score requirement. 
  • The interest you pay goes into your retirement account. 


  • The loan is tied to your current job. 
  • It can set back your retirement savings. 
  • You’ll pay taxes and penalties if you don’t repay the loan within five years. 

Family Loans 

Family loans can provide a more affordable way to pay off credit card debt. However, if you go this route, it’s important to create a written agreement that outlines the amount you’re borrowing, repayment terms, and the interest rate. 


  • You’ll likely receive a lower interest rate than what banks, credit unions, and online lenders offer.  
  • It doesn’t require a formal application process or credit score requirement for approval. 


  • You could strain your relationship with your family member if you fall behind on payments. 
  • There may be tax implications for your family member if they loan you over $17,000. 

Debt Management Plans 

A debt management plan is a program that nonprofit credit counseling agencies offer to help you pay off credit card debt. It involves grouping credit card balances into one payment and lowering your interest rate so you can pay off the debt within three to five years.  Once enrolled in the program, a credit counselor will work with you to create a budget and a repayment plan tailored to your financial needs. 


  • It allows you to pay off credit card debt within three to five years. 
  • It may help you improve your credit. 


  • It limits your access to credit cards. 
  • It prohibits you from taking out new loans. 

Credit Card Consolidation FAQ

Below are a few common questions about credit card consolidation. 

What Is the Difference Between Credit Card Refinancing and Debt Consolidation?

Credit card refinancing refers to negotiating a better rate for an existing debt, while debt consolidation involves combining multiple debts. 

What Are the Advantages of Consolidation?

Advantages of credit card consolidation include lower payments, quicker debt payoff, fewer bills, and the potential to improve your credit. 

What Are the Disadvantages of Consolidation?

Disadvantages of credit consolidation include fees and the possibility that you won’t qualify for favorable terms. 

How Does Consolidating Your Credit Cards Affect Your Credit?

While consolidating your credit cards can initially hurt your credit, the drop is only temporary. Over time, your credit score should increase as long as you make payments on time. 

Is It Smart to Consolidate Credit Card Debt?

It’s smart to consolidate credit card debt if you qualify for lower interest rates and better terms than your current credit cards. 
Credit consolidation can help you reach your goal of paying off debt. To qualify for the best terms and rates, start by taking steps to improve your credit. Check your free credit score today to see where you stand.

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