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If you’re feeling overwhelmed by credit card debt, you’re not alone. Most adults in the U.S. have three credit cards, and the average credit card balance was $5,474 in November 2021, according to the credit bureau TransUnion.
However, there are options that could help you more easily manage credit card debt — such as credit card refinancing. By refinancing, you might get a lower interest rate or even pay off your credit card debt faster.
- What is credit card refinancing?
- What are the benefits of credit card refinancing?
- Are there any downsides to credit card refinancing?
- How much could I save by refinancing my credit cards?
- How do I find the best credit card refinancing loan?
- Is refinancing a credit card a good idea?
- Is refinancing a credit card ever a bad idea?
- Will credit card refinancing hurt my credit score?
- Credit card refinancing vs. debt consolidation
- Alternatives to credit card refinancing
What is credit card refinancing?
Credit card refinancing — also known as credit card consolidation or debt consolidation — is when you take out a personal loan to pay off your credit cards. This leaves you with just one loan and one payment to handle. With a consolidation loan, you can enjoy a fixed interest rate, payments that remain the same, and an end date for paying off the account.
Ideally, credit card refinancing lowers the overall cost of your credit card debt by reducing your interest rate or your monthly payments. Here’s how it works:
Let’s say you have four credit cards whose debt balances total $10,000 with an average annual percentage rate (APR) of 26.00%. In this case, you would need to pay $317 per month over 54 months to pay off your debt. In the process, you’d pay $7,013 in interest charges.
If you qualify to consolidate the $10,000 credit card debt with a 36-month consolidation loan with 8% interest rates, you could pay off the debt 18 months earlier. While your monthly payments would stay roughly the same at $313 per month, your interest charges would only be $1,281 — a savings of $5,372.
What are the benefits of credit card refinancing?
There are several potential benefits of refinancing your credit card debt. For example, you could:
- Get a lower interest rate. As of November 2022, average credit card interest rate was 20.40%. However, you may end up with lower or higher interest rates, depending on your credit as well as your credit card issuer.But if you refinance your credit card debt, you might qualify for a lower interest rate, depending on your credit. This could save you money on interest charges and even help you pay off your credit card debt faster.
- Reduce your monthly payment. If you opt for a longer repayment term through refinancing, you could minimize your monthly payments to ease the strain on your budget. Just remember that longer repayment terms mean more interest charges over time.
- Combine debts from multiple credit cards. It can be difficult to keep track of multiple credit cards with different interest rates and payment dates. Through refinancing, you can combine the debt from each of your credit cards into one new loan. In many cases, you can additionally consolidate other types of debt, such as medical bills or unsecured personal loans.
Are there any downsides to credit card refinancing?
Before you proceed, consider the benefits and drawbacks to help you come to a conclusion. Here are some potential downsides to weigh:
- Could come with fees: Before you apply for a new loan, ensure you understand the fees involved, such as an origination fee for processing the loan. Excessive fees can offset any savings you earn, especially if you’re refinancing a low amount.
- Could lead to more debt: Racking up charges on your newly paid-off credit cards can lead to falling deeper into debt. Work to change the spending habits that lead to your debt before proceeding with a debt consolidation loan.
- Could potentially lower your credit score: When reviewing your loan application, your lender will likely perform a hard inquiry that could negatively affect your credit. A hard inquiry is a request to see your credit report to assess your eligibility for a loan. But the dip in your credit is temporary, and your score should recover in a few months.
How much could I save by refinancing my credit cards?
It’s possible to pay off your credit card on your own — but refinancing might help you save money along the way.
For example: Say you had the average credit card balance of $5,589 with the average interest rate of 20.40%. If you paid off this balance over three years, you’d end up paying a total of $7,518, including $1,929 in interest.
But if you refinanced the balance into a new three-year loan with the average personal loan interest rate of 11.23%, you’d pay a total of $6,609, including $1,020 in interest charges. This means you’d save $909 in comparison to paying off the card without refinancing.
If you decide to refinance your credit cards with a personal loan, be sure to consider how much that loan will cost you over time and whether the savings are worth it for you. You can estimate how much you’ll pay for a loan using our personal loan calculator below.
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How do I find the best credit card refinancing loan?
To find the best credit card refinancing loan for your needs, it’s important to compare as many personal loan lenders as possible.
Here are factors to consider as you shop around and research your options:
- APR: The Annual Percentage Rate (APR) includes the loan’s interest rate as well as any additional fees. This number gives you a more accurate picture of the cost of borrowing money.The APR you’ll qualify is primarily determined by your credit and your repayment term. You’ll typically need good to excellent credit to qualify for the lowest personal loan interest rates.
- Repayment terms: Personal loan repayment terms usually range from one to seven years, depending on the lender. Consider choosing the shortest repayment term you can afford to save as much on interest charges as possible — especially since shorter terms tend to come with lower interest rates.But if you need a lower monthly payment, then a longer term might be a better fit — just keep in mind that you’ll pay more in interest over time.
- Fees: Personal loans sometimes come with fees — such as origination fees, prepayment penalty fees, or late fees — which could add to your overall loan cost.
- Loan amounts: When reviewing offers, note the borrowing amount you’re approved for, as some loans may not be as cheap as they seem at first sight. Remember, a loan with a long repayment term will typically have a lower monthly payment, but you’ll likely pay more interest over time.
- Credit score and income requirements: There’s little sense in applying for a loan and risking the hard credit inquiry if you’re unlikely to qualify or receive a decent rate. Ensure you understand a lender’s minimum credit score and income requirements before applying.
- Cosigner acceptance: A cosigner with good or excellent credit may improve your approval odds, potentially with a lower interest rate and more favorable terms. Just keep in mind that if you fall behind on payments, your cosigner will be responsible for repaying the loan.
If you’re ready to find a credit card refinancing loan, Credible can help. You can compare your prequalified rates from our partner lenders in the table below that offer personal loans for credit card refinancing in just two minutes.
| Lender | Fixed rates | Loan amounts | Min. credit score | Loan terms (years) |
|---|---|---|---|---|
Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 7.99% - 35.99% APR | $7,500 to $50,000 | Not disclosed by lender | 2, 3, 4, 5 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 9.95% - 35.99% APR | $2,000 to $35,000** | 550 | 2, 3, 4, 5* |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 7.99% - 15.19% APR | $10,000 to $50,000 | 740 | 3, 4, 5, 6 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 8.99% - 35.99% APR | $5,000 to $35,000 | 600 | 2, 3, 4, 5 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 6.99% - 24.99% APR | $2,500 to $40,000 | 660 | 3, 4, 5, 6, 7 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 11.25% - 24.5% APR | $5,000 to $40,000 | 640 | 2, 3, 4, 5 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 9.57% - 35.99% APR | $1,000 to $40,000 | 660 | 3, 5 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 7.99% - 35.99% APR | $2,000 to $36,500 | 600 | 2, 3, 4, 5, 6 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 7.99% - 24.99% APR | $5,000 to $100,000 | 700 | 2, 3, 4, 5, 6, 7 (up to 12 years for home improvement loans) |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 18.0% - 35.99% APR | $1,500 to $20,000 | None | 2, 3, 4, 5 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 8.49% - 17.99% APR | $600 to $50,000 (depending on loan term) | 700 | 1, 2, 3, 4, 5 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 8.99% - 25.81% APR10 | $5,000 to $100,000 | Does not disclose | 2, 3, 4, 5, 6, 7 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 11.69% - 35.99% APR7 | $1,000 to $50,000 | 560 | 3, 5, or 7 years 8 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 8.49% - 35.99% APR | $1,000 to $50,000 | 600 | 2, 3, 5, 6 |
|
||||
Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 4.6% - 35.99% APR4 | $1,000 to $50,0005 | 620 | 3 or 5 years4 |
|
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Is refinancing a credit card a good idea?
While refinancing credit card debt could be a good idea in some cases, it isn’t right for everyone. Here are a few situations where refinancing might be the right move:
- You can qualify for a lower interest rate. If you have good credit and can get approved for a lower interest rate or better terms through refinancing, then it could be a good idea.
- You need a lower monthly payment. If you’re struggling to manage your credit card payments, refinancing to a longer repayment term can help fit your payments into your budget.
- You have multiple credit cards. If you have several credit cards, refinancing will let you combine them into one loan. This could be a good way to more easily manage your debt. With one payment date to keep track of, you might also find it’s easier to make your payments on time.
Is refinancing a credit card ever a bad idea?
Here are a few scenarios where it might be better to pay off your credit cards without refinancing:
- You have poor credit. If you have poor credit, you might have a hard time qualifying for better terms. In this case, refinancing probably isn’t worth it. You should aim to improve your credit first by paying down existing debts and disputing any errors in your credit reports.
- You have a low balance. If your credit card balance is relatively low, then it might be better to either just pay it off or use another option like a 0% balance transfer card to save money on interest.
- You enjoy credit card rewards. Several credit cards offer various rewards. If you refinance, you’ll no longer have access to these perks.
Check Out: How Debt Consolidation Loans Can Help Your Credit Score
Will credit card refinancing hurt my credit score?
Before a lender can approve you for a debt consolidation loan, they’ll need to look at your credit. That means they’ll have to request a hard credit inquiry of your credit report, which can negatively impact your credit. Hard inquiries can remain on your credit report for two years, although the dip in your credit score is usually minor and lasts for three months to a year.
Fortunately, credit card refinancing can positively affect your credit over the long term in three ways:
- Payment history: By making consistent on-time payments on your new loan, you’ll build a strong payment history, which accounts for 35% of your FICO credit score.
- Amounts owed: The amount of debt you owe makes up 30% of your credit score. A significant component of this factor is your credit utilization ratio, which is the amount of credit you’re using compared to your credit limit.You can lower your credit utilization ratio by paying off your revolving credit card accounts. Generally, the lower your credit utilization ratio, the better it is for your credit score. A good credit utilization is 30% or less.
- Credit mix: Creditors like to see that you can manage different types of accounts, such as credit cards, personal loans, auto loans, lines of credit, and mortgages. Adding a personal consolidation loan to your credit profile could improve your credit mix, which comprises 10% of your credit score.
Credit card refinancing vs. debt consolidation
Credit card refinancing and debt consolidation are terms that are often used interchangeably. Either way, the goal is to consolidate your credit card debt with a personal loan.
Good to know: A debt consolidation loan can pay off other types of credit besides credit cards, including medical debt, business loans, and other personal loans.
Alternatives to credit card refinancing
If credit card refinancing doesn’t seem like the best fit for you, here are a few other options to consider:
- Use a balance transfer credit card. This is another way to consolidate your credit card debt — but instead of paying off the old debt with a personal loan, you’ll move your balances to a new card.Some balance transfer cards come with a 0% APR introductory offer, which means you can avoid paying interest if you can repay your balance before this period ends. However, if you can’t pay off your card in time, you could get stuck with some hefty interest charges.
- Ask a friend or family member for help. If you’re struggling to get out of credit card debt, trusted friends or relatives might have the means and flexibility to help you pay it down. Before you go this route, be sure to discuss how and when you’ll pay them back so your relationships aren’t strained.
- Take out a home equity loan. If you’re a homeowner, this type of loan can let you access the equity in your home. Home equity loans often come with lower interest rates than personal loans because the loan is secured with your property as collateral. But keep in mind that if you can’t make your payments, you risk losing your house to foreclosure.
- Consider credit counseling. A credit counselor can help you gain control of your finances and improve your debt management skills. An accredited credit counseling organization like the National Foundation for Credit Counseling can help you find a local counselor. Keep in mind that debt settlement and debt management plans may temporarily put a dip on your credit score.
- Use a HELOC. A home equity line of credit (HELOC) allows you to tap into your home’s equity for cash. Since your house secures the loan, you may qualify for a lower rate than you’d get with a personal loan or balance transfer credit card. However, because a HELOC is also secured with your home as collateral, you risk losing your home if you can’t repay the loan.
Dori Zinn contributed to the reporting for this article.
