Credit card consolidation is an easy, effective strategy to pay off debt. But with so many consolidation options available, it’s crucial to understand how each one of them works.  

Credit cards can be an excellent resource when you have an emergency. It can also help you build credit and earn rewards like miles and cashback. But, it is easy to get sucked into a cycle of unnecessary spending and mounting credit card debt. 

If you have multiple credit cards with high interest rates and are carrying a lot of debt across them, this guide will provide you with all the information you need to decide if this is the right option for you.

Is Credit Card Consolidation a Good Idea?

Credit card consolidation offers you a clear path toward a debt-free life. It’s a good idea for those who are struggling with multiple credit cards and have no clear way to pay them off.

In 2023, credit card debt, in terms of total balances outstanding, was at a record $1.13 trillion in America. Like millions of Americans, if you find yourself overwhelmed with multiple debts, debt consolidation can help.

Consolidation of credit card debt allows you to roll all your high-interest credit card debt into a single, easy payment with a low–often fixed–interest rate. And with a fixed period of time (the loan’s “term”) to pay off your debt, it offers you the structure you need to become debt-free.

What Is Credit Card Consolidation?

Credit card consolidation means rolling all your credit card accounts into a single loan.

If you have multiple credit cards, consolidating them can simplify the debt repayment process. It can even lower your payments enough to pay off your debt sooner than you might think.

In 2023, the average credit card debt per credit card holder in America was $6,864. Debt relief options like consolidation can help you regain control of your finances, so you can pay off your debt and start saving again. 

It’s important to note that credit card debt consolidation does not erase your debt. Instead, it helps you replace your high-interest debt with a lower-interest loan. This effectively “refinance” your variable-rate, high-interest revolving credit card balances into a more manageable, fixed-rate, fixed-term loan that can be paid down methodically each month, like a car loan or mortgage loan. Ultimately, this will help you save money overall and pay less towards interest.

3 Best Credit Card Consolidation Options

Now that you know what debt consolidation is and how it works, it’s time to explore all the options available to you. 

1. Personal Loans

Personal loans for credit card consolidation are offered by credit unions, online lenders, and local banks. The application process can be completed online or over the phone.

Eligibility can be determined within one business day in many cases, and funds can often be deposited directly into your bank account if you are approved. Interest rates and loan amounts are determined by your credit score, your income, and the terms of the personal loans offered by the lender.

Most lenders use metrics such as total debts, total assets, credit score, and income to determine eligibility. If you have a good debt-to-income ratio and payment history, you may be eligible for a competitive interest rate.

There are a few drawbacks to personal loans, however, that you should be aware of. These include origination fees, prepayment penalties, and difficulty accessing lower interest rates for those with bad credit or newer borrowers without an established credit profile.

2. Debt Consolidation Programs

Another great option is to enroll in a debt consolidation program offered by a debt management company. The company can work with your credit card issuers and other lenders to help negotiate repayment terms, eliminate late fees, or even reduce interest rates.

The single monthly payment you’ll typically make when enrolled in the program will be less than making all the credit card payments individually. In some programs, you may be required to close some of your credit cards. 

Once enrolled in the program, all your credit card balances will be rolled into a single payment with a fixed interest rate. Credit card debt consolidation programs are suitable for those who need support overcoming repayment challenges.

A professional can work with you to come up with a debt solution that works for you. They can explore all your loan options, find loans with the lowest rates, and help you set up a loan payment that works for your budget.

3. 0% Balance Transfer Credit Cards

Many credit card companies offer introductory 0% APR balance transfers when you open a new card with them. In fact, some credit cards offered by certain lenders actually specialize in offering regular balance transfer promotions to their customers with “good” to “excellent” credit.  

The offer is often available just for a limited time, and you may be subject to 3% to 5% balance transfer fees each time you move a balance. A 0% annual percentage rate is typically offered for 12-18 months.

You can transfer all your outstanding credit card balances to a 0% balance transfer credit card and then pay off the balance during the 0% APR introductory period. 

The downside to this option is that you’ll only have a limited time period available to pay off the entire balance while enjoying this special zero-interest promotion. If you don’t manage to pay off the entire balance during this period, any remaining balances left at the end of the promotional rate time frame will start accruing interest charges from that point forward.

Another downside is that you’ll usually need “good” (an avg FICO score of 680+) to “excellent” (750+) credit to qualify for a 0% APR credit card for debt consolidation.

How Does Credit Card Consolidation Work?

The process starts with setting up a credit card consolidation loan or plan. Once you are approved for the consolidation loan or balance transfer credit card, the loan funds can be used to pay all your debts.

You’ll then make a single monthly payment instead of making payments towards different credit cards. You can even set up autopay to ensure you don’t miss any payments. You’ll also have a lower annual percentage rate (APR) overall to replace your high-interest debt. 

Continue to make payments regularly and on time towards your new loan until you have managed to pay it off in full. Consolidation of credit card debt is easy and straightforward. Whether you are attempting consolidation on your own, through a debt relief company, or with a credit counselor, the idea is to gather all your debts into one payment.

Pros of Credit Card Consolidation

Debt consolidation is all about lowering your interest rate and saving money. There are several other benefits of this debt relief option:

  • You will be paying less, in dollars per monthly payment, towards interest.
  • You will be able to get out of debt faster because more of your payment each month will be going toward reducing principal rather than having most of it going toward the interest that accrues each month.
  • You’ll only make a single payment each month.
  • Your credit cards will be paid off in full.
  • Your credit score will not be negatively affected if you make timely payments.  

Cons of Credit Card Consolidation

While there are several obvious advantages of debt consolidation, you should also be aware of the risks associated with this option: 

  • There may be added costs such as annual fees, origination fees, and balance transfer fees.
  • Failing to make payments before the due date on your credit card consolidation loan can have a negative impact on your credit report.
  • While it simplifies payments and makes repayment of debt easier, it will not address the underlying habits that lead to credit card debt in the first place.
  • If you haven't addressed your relationship with money and spending, you may find yourself using the same credit cards again and owing more than you did when you started, resulting in a much larger debt problem.

Alternatives to Credit Card Consolidation

If you are not yet ready for debt consolidation, you can try several other things to deal with your debt.

  • Make a budget to figure out if you can cut down your spending and pay off your credit card debt.
  • Get to the bottom of why you have debt in the first place. If you are spending more than what you earn, you will need to address that issue to get out of debt and stay out of it in the future.
  • Try debt repayment strategies like the debt avalanche or debt snowball methods to pay off credit card debt on your own.
  • Seek credit counseling from a nonprofit or a for-profit organization. Credit counselors can advise you on how to pay off debts, make a budget, and manage your money better.

Pay Off Your Debt With Credit Card Consolidation

For some, credit card consolidation can provide the structure and predictability they need to pay off their debts in a fixed time period. For others, debt relief programs like debt settlement or debt management plans may be more suitable.

Regardless of your financial situation or your needs, TurboDebt can help you pay off your debts, so you can start building your savings. 

With our counseling, consultation, and planning services, we can help you identify the right debt relief option for your needs. Connect with us today for a free consultation.  

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