How To Consolidate Credit Card Debt

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Nothing is worse than feeling like you have accumulated more credit card debt than you can handle. And, realistically, almost any amount of debt can quickly become too much to handle, thanks to the high interest rates most revolving debt carries. For this reason, many people decide to consolidate credit card debt.

Why Consolidate Your Credit Card Debt?

The only reason to consolidate your credit card debt is because you want to get out from under it – and, realistically, who doesn’t? However, if you do not keep this goal in mind, you can easily make a decision that will cost you more in the long run, or even jeopardize your credit score. So remember, when consolidating your credit card debt, make sure every move you make will result in less interest and fees and/or a shorter pay-down period.

Consolidate Credit Card Debt on Another Card

Perhaps the most common way to consolidate credit card debt is to move all your balances to the same card. If you’re like most people, you probably get credit card offers in the mail on a regular basis. In this method of consolidating credit card debt, the idea is to find a credit card offer with a better deal than you are currently getting, and move your balances so that you can take advantage of the lower rates and fees.

What to Look Out For

Consolidating your credit card debt on another card is only a good idea if the new card really is a better deal than you already have. If you aren’t careful, you could end up costing yourself more money or even destroying your credit rating. To make sure you don’t end up in a worse situation than you were before, you will need to:

  1. Find out how long the introductory rate will last. Most new credit card offers flash super-low rates at you in big numbers, hoping you won’t look any further. However, usually these “teaser” rates only last a short period of time. Also, if you go over your credit limit or make a late payment you may lose your initial deal. Make sure you know how long the introductory rates will last, and what you will have to do to keep them.
  2. Make sure the introductory rate applies to balance transfers. Many cards offer a different teaser rate for new purchases than for balance transfers. Make sure that you are looking at the correct rate when you make your decision.
  3. Find out the normal interest rates, and compare them to what you are already paying. Don’t make your decision based solely on the teaser rates, especially if they won’t last forever – which, in most cases, they won’t. Unless you can feasibly pay off the entire balance during the introductory period, you will need to make sure the normal rates are also a better deal than your current cards.
  4. Find out if the card carries an annual fee. Oftentimes cards will make up for lower interest rates by charging an annual fee. Take such fees into account when you are determining whether the new card truly offers a better deal.
  5. Find out if you will be charged a balance transfer fee. Most cards apply a fee to all transfers – the only question is, how much. Balance transfer fees are often stated as a percentage of the total transfer, although some cards cap these fees so that they will not go over a certain amount.

Consolidate Credit Card Debt Using a Loan

Another approach to consolidating credit card debt is to get a loan for the amount of revolving debt. Debt consolidation loans are useful because you can spread the payments over a longer period of time, lowering the payment amount. Also, because the loan is for a specific amount and extends over a specific period of time, the payments will be the same every month, making it easier for you to budget for them.

What to Look Out For

The advantages of a loan – lower interest rates and fixed payment amounts – make it an appealing option for those wanting to consolidate credit card debt. However, a loan also carries over a number of years, which can mean that it may take longer to get out from under your debt. To make sure you make the best decision for your financial situation and your credit score, you should be sure to:

  1. Find out what your interest rates will be. Most likely, your interest rates will be lower than your credit cards, but you need to know specifically how much lower.
  2. Find out how long the loan term will be. Sometimes you can choose this yourself. Ideally, you should choose the shortest term you can afford the payments on, as the sooner you get out from under your debt the better.
  3. Compare the total interest you will pay over the life of the loan to the amount of interest you will pay on your cards if you pay them off at the same rate. Although the rate is lower, the loan term may also be longer than you need. This means that the total interest on the loan could actually be more than the total interest you will pay on the cards.

Consolidate Credit Card Debt without Hurting Your Credit Score

If not done properly, consolidating your credit card debt can actually do more damage to your credit score. To get your debt under control and maintain or improve your credit score, make sure you:

  1. Maintain your revolving debt at no more than 50% of your available credit. If you consolidate your credit card debt onto one card and promptly cancel all of the old accounts, you can hurt your credit score, as this makes it look like you habitually max out your available credit. Instead, keep enough credit lines open to balance the amount of your debt – and then don’t charge anything more.
  2. Keep two to four credit cards. Once you have consolidated your credit card debt, choose a couple cards to keep and cancel all the rest. Be sure to hang on to older cards, especially if you are in good standing with the creditor, as these establish your long-term credit history.
  3. Stop applying for new credit lines once you have consolidated your credit card debt. Don’t succumb to the temptation to keep looking for an even better deal. Instead, choose one and stick with it. If you move your balance around too much, you will not only rack up more debt in balance transfer fees, but also damage your credit score with each additional application.

Getting Your Debt Under Control

It is a scary thing to realize that you are deeply mired in debt. If done correctly, consolidating your credit card debt can help by reducing the amount paid to interest. However, never forget that the reason you are consolidating your credit card debt is to help get you out of debt, and always make sure that every decision you make supports that goal in some way.


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Credit card consolidation can be a difficult process to sort through. But it is essential for many people to get their financial lives straightened out.

By Jason Kay