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How to consolidate your credit card debt


Carrying credit card debt is an American tradition. The average household debt on credit cards is $6,194with an interest rate of approximately 14.51%. And, if you have cards with higher interest rates, it’s harder to pay off the balance.

If you feel stuck in this cycle, there are ways out. Here are some options for consolidating your credit card debt and paying off your balances.

Use a credit card with balance transfer

If you have a good credit history (your score is above 680), you may qualify for a credit card with a generous introductory period. Some card issuers allow you to pay no interest on transferred balances for the first 12-18 months. During this time, you can pay off or pay down your balances, saving you money in interest charges over the term of the debt.

Also: The best balance transfer cards

How it works: When you sign up, you notify the card issuer of any balance you wish to transfer to them. You’ll need basic information, such as your account number, balance owing, and mailing address of the credit card company. Upon approval, the card provider issues a check to settle the credit card balance with your previous provider. Then you will make payments at 0% interest for this introductory period. If you don’t repay the balance within that time, you’ll pay interest until you repay the debt.


  • You will benefit from a 0% introductory rate
  • You’ll save money on interest charges over the life of the debt and be able to pay it off faster
  • You consolidate multiple payments into one

The inconvenients:

  • Some issuers charge a balance transfer fee (3% to 5% of the transferred balance)
  • You have a narrow window of opportunity to pay it back

Pay off your debts with the equity in your home

A home equity loan allows you to borrow against the equity in your home to pay off your debts. This is a smart option as they generally carry lower interest rates than personal loans (these are secured loans, since you are using the equity in your home as collateral). The only downside is that if you fail to repay a home equity loan, your bank could take your house.

How it works: A home equity loan allows you to borrow a lump sum. You can use that money to pay off your old credit card debt, then you’ll pay off the home equity loan in fixed installments, the same way auto loans work.

Also: 5 ways to improve your credit score without a credit card

There is also a home equity line of credit (HELOC) that you can choose from. These are similar to credit cards in that you have a line of credit that you can borrow. You can use as many as you need to pay off your credit cards. And as you repay, you have more access to your credit limit. If the ultimate goal is to pay off debt, a home equity loan is a better choice. You borrow what you need and have fixed payments until you pay off the debt.


  • The interest rate can be lower than that of a personal loan
  • You have fixed monthly payments with a mortgage
  • A HELOC gives you the ability to borrow against your line of credit as needed
  • You may be eligible for a longer repayment period

The inconvenients:

  • It is a more complex process than a personal loan in that you need the equity in your home (at least 15% to 20%) and an appraisal.
  • If you don’t repay your loan, you could lose your home

Turn your credit card debt into a personal loan

Another option is to consolidate your credit card debt into a personal loan. If you have good credit, you may qualify for a lower interest rate than you currently pay on your credit cards.

It allows you to pay off your balance faster, since you don’t have to deal with a higher interest rate. And it makes it easier for you to pay off your debts because you only have one payment instead of many.

Additionally, some online lenders allow you to see if you qualify by slightly pulling on your credit score. This means that a serious inquiry will not show up on your credit report.

And credit unions are a smart option to consider because they keep their interest rates low for their members. It’s even smarter if you have an established relationship with one.


  • You may qualify for lower interest rates
  • Some lenders send payments directly to credit card companies on your behalf
  • Your payments are easier to manage since you only have one
  • Fixed payment makes budgeting easier

The inconvenients:

  • Some lenders assess an origination fee to consolidate – this can amount to 3% to 5% of the debt owed
  • Your credit score could drop if your old credit card provider closes your account

How do I consolidate my credit card debt?

You can consolidate your credit card debt through a personal loan, credit cards with a 0% introductory offer, or a home equity loan. Before exploring an option, review your credit reports. You can receive one for free from each office each year at annualcreditreport.com. This allows you to see where you stand, make improvements if needed, and challenge any items that shouldn’t be there. Since potential lenders use this information to assess risk, knowing where you stand helps you be realistic about your options.

If you own a home with a lower credit score, a home equity loan might be a smarter option. You may qualify for lower interest rates than a personal loan. And since it’s a secured loan, your bank might feel more comfortable approving you.

Also: The Best Unsecured Credit Cards: Bad Credit? Carefree

Meanwhile, if you have a great score, it opens more doors for you. You can explore credit cards with low introductory rates or personal lenders.

In addition to checking your credit, take an inventory of any debts you wish to consolidate. Gather everyone’s latest statements and receive payment quotes. It lets you see how much you need to borrow.

Is credit card debt consolidation right for me?

If you’ve made payments on your credit card balances but haven’t been able to pay them off, consolidating them might be a good choice.

Which option is best for me?

Look at how much credit card debt you have and set realistic goals for how long it will take you to pay it off. If you think you can make it in the next 12 to 18 months, a credit card with a 0% introductory rate can help you pay off your balances at a lower cost. Conversely, a personal loan works best if it will take several years to pay off balances.

How can I consolidate my credit card debt with a lower credit score?

If you own a home with equity in your home, you may be able to take out a home equity loan. However, if you’re not and are having trouble keeping up with your payments, a debt management plan might be your next option. Often, you’ll work with a consumer credit counselor, who will negotiate on your behalf with your creditors to set up monthly payments. In some cases, they might be able to lower the interest rate and eliminate late fees. It allows you a repayment plan that fits your budget and can get you out of the high interest minimum payment cycle.