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How To Consolidate Credit Card Debt

Debt consolidation can save you money and reduce the number of bills you have.

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By Lindsay Frankel
Lindsay Frankel

Written by

Lindsay Frankel

Writer

Lindsay Frankel has been covering personal finance for six years, with particular expertise in loans, insurance, and real estate. She’s written hundreds of articles across a range of well-known outlets, including LendingTree, Investopedia, SFGate, and more. Outside of writing, she enjoys playing music and exploring nature with her rescue dog, Lucy.

Edited by Meredith Mangan

Written by

Meredith Mangan

Senior Editor

Meredith Mangan is Credible's Senior Editor for Personal Loans. Since 2011, she’s helped steer content creation in the areas of mortgages and loans, insurance, credit cards, and investing for major finance verticals, including Investopedia, Money Crashers, and The Balance.

Updated February 14, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances.

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Credit card debt consolidation combines your outstanding credit card balances into one new balance with one monthly bill, usually with the aim of lowering your interest rate or monthly payment.

Learn how it works, how to choose the right method of debt consolidation, and how to distinguish between credit card refinancing and debt consolidation. We’ll also provide some options for debt consolidation loans.

How does credit card debt consolidation work?

If you’re carrying a balance on one or more credit cards, you’re probably forking over a lot of money in interest each month. That’s because the average interest rate across credit card plans was 20.68% as of May 2023, according to the Federal Reserve. Several other loan types, including personal loans, come with lower annual percentage rates (APRs), which include the interest rate plus any fees.

To snag a lower interest rate, you can take out a new loan to pay off your debts, or you can transfer your balances to a new credit card with an introductory APR offer. We’ll cover each option in detail, but in both situations, you’ll be left with one monthly payment instead of several.

This won’t automatically save you money, however — you need to check that the APR on the new loan or credit card is lower than the APR on your current cards. Furthermore, if there’s a credit card balance transfer fee or a loan origination fee, you’ll need to make sure it doesn’t offset the savings on interest.

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Tip: Before you consolidate your credit card debt, ask your credit card issuers for a lower interest rate or monthly payment.

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Ways to consolidate credit card debt

If you’re looking to get out of debt faster, you have a few debt consolidation options:

Balance transfer credit cards

Some credit card issuers offer a low or 0% introductory APR on balance transfers. These offers allow you to combine multiple debts on one credit card with one monthly payment. While you’ll typically pay a balance transfer fee (up to 5% of the transferred balance), you may be able to avoid paying interest for up to 21 months on the amount transferred, depending on the bank.

But you’ll need to stay on-time with the minimum payments and ensure you pay off the full balance before the introductory period is up. Otherwise, you could get stuck with a high APR.

Personal loans

You can get a personal loan for debt consolidation from a bank, credit union, or online lender. You may receive a lump sum, which you can use to pay off each of your credit card bills, or you may be able to request that the lender pay your creditors directly. Either way, you’re left with a single loan payment (that’s ideally lower-interest). Before taking out a personal loan, make sure the total cost of borrowing, including the interest rate and any fees, is less than you pay to carry a balance on your credit cards.

Learn More: Ways to Consolidate Credit Card Debt

Important: Use the APR to compare personal loans costs — it accounts for the interest rate and fees, such as an origination fee.

Home equity loans

Home equity loans allow you to access the equity in your home to use as you please, such as to pay off your credit card debt. These loans typically feature lower interest rates than personal loans, but may carry more upfront costs. Plus, they’re secured by your home, which means that if you default on the loan, the lender could foreclose.

Make sure you have room for the monthly payments in your budget before closing on a home equity loan.

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