Should I Consolidate My Credit Card Debt?

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Contributor, Benzinga
October 26, 2023

American consumer debt is soaring. The average American carries multiple forms of debt, from mortgages and car loans to credit card and student debt. If you carry credit card debt on multiple cards, keeping track of payment due dates, interest rates and minimum payments can be overwhelming. Consolidating credit card debt could simplify your finances but may come with high costs that sometimes outweigh the benefits. Read on to understand the pros and cons so you can answer the question, “Should I consolidate my credit card debt?”

What Is Credit Card Debt Consolidation?

Credit card debt consolidation is the process of moving credit card debt to a single card or consolidating debt into a debt consolidation loan. With credit card debt consolidation, you move different credit card debts with various interest rates into a single payment. This can make it easier to pay off debt, ensuring you don’t miss a payment. 

Types of Credit Card Debt Consolidation

Credit card debt consolidation comes in many forms, from balance transfers to home equity lines of credit (HELOCs). Here are the options you can consider. 

Credit Card Balance Transfers

With a credit card balance transfer, you’ll transfer all credit card debt to a single card. This usually comes with a 3% transfer fee. But if you can transfer debt to a card with a 0% introductory annual percentage rate (APR), you'll have the chance to save on interest payments, making the transfer fee worth it. 

Debt Consolidation Loan

A debt consolidation loan is a loan you take to pay off debt card debt. This converts the debt into a single loan from a bank, credit union or other lender. Debt consolidation loans often have lower interest rates than credit card debt, making it a smart way to return interest payments on credit cards. 

Debt Management Program

A debt management plan is an agreement you make with a creditor for repayment of outstanding debt. This is usually a way to address high consumer debt. With a debt management program, you may speak with your credit card company and negotiate a repayment plan after consolidating credit card debt. 

Alternative debt management plans from platforms like Accredited Debt Relief help you pay off debt and negotiate balances. Check out this platform if you want to learn to budget properly and avoid loans or balance transfers.

Home Equity Line of Credit (HELOC)

A home equity line of credit or HELOC is secured by your home. You’ll get a revolving credit line to consolidate higher-interest rate debt like credit card debt for a lower interest rate. This line of credit allows you to pay off credit card debt and then pay off debt with lower interest rates through regular monthly payments.

Is it Smart to Consolidate Credit Card Debt?

For many consumers, it’s smart to consolidate debt. However, it may not make sense if you end up paying more upfront in transfer fees. Whether it makes sense for you depends on the total debt, interest rates and psychology. That’s because, for some people, the simplicity of making a single payment on debt makes it easier to pay off debt quickly. The cons are potential higher costs. Below is a summary of the pros.

Simplified Payments 

Simplified payments are one of the main reasons to consolidate debt. Instead of multiple credit card bills, you’ll only have to keep track of one payment. That means you’re less likely to miss a payment, which, over time, can be critical for building a positive credit score. 

Lower Interest Rates

When you consolidate debt, especially with a debt consolidation loan, HELOC or 0% APR credit card transfer, you can pay lower interest rates than standard credit card rates. If it takes you over a couple of months to pay off, this interest savings can add up.  

Debt Repayment Plan 

When you have a debt repayment plan, taking control of debt is simpler. You’ll know how much you owe and can make a plan for monthly payments to potentially pay off debt faster.

Potential Credit Score Improvement

You may increase the total available credit when you take out a debt consolidation loan or other loan opportunity. Likewise, by paying off credit card debt or consolidating credit card debt you’ll potentially decrease your credit utilization rate. These two actions could lead to improvements in your credit score — even within the first month. 

Limitations of Consolidating Credit Card Debt

While consolidating credit card debt can make it easier to pay off debt or boost your credit score quickly, it’s not without limitations.

Potential for Additional Debt 

Consolidating credit card debt does not eliminate the underlying behavior that led to the debt in the first place. When consolidating debt, make a plan to pay it off without taking on additional debt. 

Fees and Charges 

Some consolidation methods may come with fees or charges, such as balance transfer fees or origination fees. These can sometimes lead to higher payments than credit card interest. 

For example, if you’re able to pay off $4,000 in credit card debt in two months, even if the credit card has an interest rate of 30%, you’ll pay $100 in interest the first month (assuming you pay $2,000 at the end of the first month). In the second month, you’ll pay $50 in interest. 

That $150 in interest payments is slightly more than a 3% transfer fee ($120). But you could pay less by just focusing on paying off the debt without a transfer if:

  • There are any additional fees 
  • You can pay off the debt throughout the month
  • Your APR is 24% or less 

On the other hand, if you need four months to pay off the credit card debt, the 3% transfer fee can be worth it to consolidate the debt, especially if you transfer to a card with a lower APR.

Loss of Benefits 

If you consolidate credit card debt by closing existing accounts, you may lose certain benefits associated with those cards, such as rewards programs or promotional offers. But you don’t have to close credit cards to consolidate. You can transfer and keep the other account open with a $0 balance. Double-check that the annual fee is worth the benefits you receive. 

Extended Repayment Period 

Consolidating credit card debt may extend the repayment period, especially if you opt for a longer-term loan. While this can reduce monthly payments, it may result in paying more interest in the long run. Carefully check interest rates and use a reliable interest payment calculator to confirm the total interest payments and consider whether you can pay off debt faster. 

Is Consolidating Credit Card Debt Right for You?

Whether consolidating debt is right for you depends on factors such as total debt, interest rates, total available credit and your psychology. Here’s how to decide which is best for you.

Evaluate Your Goals and Financial Circumstances

Ask yourself:

  • Are you someone who is comfortable managing multiple accounts, or do you easily lose track of details? 
  • Do you need simplicity or like to maximize savings?
  • Can you get a better interest rate through a debt consolidation loan or a 0% APR introductory credit card offer?
  • How much will total transfer fees cost you? Is that less than interest savings?
  • Are you planning to apply for a mortgage soon? In that case, any credit boost you can achieve will make a bigger financial impact long term. 
  • Do you know which credit card you should pay off first?

With the answers to these questions, you can more easily decide which option is best for you. Higher debt amounts or debt that will take more than two to three months to pay off is worth consolidating to a lower interest rate. 

Weigh the Advantages and Disadvantages of Consolidation

Then, weigh the pros and cons of consolidation for your situation. Do you have high debt or need a simplified payment? Will transfer fees cost more than potential savings? Consider the advantages and disadvantages listed above to decide whether it makes sense for you. 

As the earlier example shows, in many cases, the financial savings are small, but the psychological benefits can be significant. Holding debt in a single account and seeing that amount reduced each month can be motivating — and less overwhelming — for many people. 

Consider Alternatives to Debt Consolidation

Alternatives to debt consolidation include a cash-out refinance or HELOC. You can also make budget adjustments to pay off the debt faster or take a personal loan from a family member or friend to pay off the credit card debt. Finally, consider whether you want to speak with a credit counselor to discuss the best options for your situation.

Managing Credit Card Debt

Once you start paying off credit card debt, the key is to build momentum. By taking control of credit card debt, you’re setting yourself up for greater financial freedom and greater opportunities. Create a plan and stick with it. Plan rewards for yourself at each milestone or when the debt is paid off to increase motivation. Enlist the support of family and friends. With planning, you can create a more flexible financial future for your family.

Frequently Asked Questions


How long does the credit card debt consolidation process take?


Securing a debt consolidation loan takes four to six weeks for approval. If you choose a credit card, a balance transfer can happen in a few days to a week.


Can you continue using your credit cards after consolidating your credit card debt?


You can continue using your credit cards after consolidating credit card debt. Just be careful not to build on additional debt to pay off debt faster.


Will debt consolidation affect your ability to qualify for new credit cards or loans in the future?


A debt consolidation loan can help you pay off debt faster and improve your credit score. It shouldn’t affect your ability to qualify for new credit cards or loans in the future as long as you use the debt consolidation loan responsibly to reduce total debt.

Alison Plaut

About Alison Plaut

Alison Plaut is a personal finance writer with a sustainable MBA, passionate about helping people learn more about financial basics for wealth building and financial freedom. She has more than 17 years of writing experience, focused on real estate and mortgage, business, personal finance, and investing. Her work has been published in The Motley Fool, MoneyLion, and she is a regular contributor for Benzinga.