Credit Card Consolidation: A How To Guide

Credit Card Consolidation: A How To Guide

Credit card debt is a huge issue for American families, with the average house holding $8,173 in credit card debt, according to The Balance. If you are one of those households, credit card debt consolidation could help you lower your number of payments, minimum monthly payment, and put you on track to a full debt payoff.

If saving money and paying off debt sounds good to you, follow along to learn more about credit card consolidation and how it can help your finances.

If you are new to money management, let's define consolidation: It simply means merging your debts into one bigger debt instead of a multiple smaller ones.

What is credit card consolidation?

Credit card consolidation is a personal finance strategy to merge all credit card balances into one credit card or loan. Cardholders do this to lower their monthly payments, simplify the number of payments they make each month, and to lower their interest cost each month to maintain the debt.

If you want to consolidate credit card debt, it is not free in most cases, so this shouldn’t be considered if you have your debt under control and are on track for a payoff. You should only go through a debt consolidation if it will save you money, it isn’t worth it just to simplify your monthly payments. But if the math says the consolidation will ultimately help you save, it can be a great tactic to employ.

Only consolidate to lower interest cards and loans

For example, consider someone with tens of thousands of dollars in credit card debt, a car loan, and a mortgage that is almost paid off.

In order to consolidate those loans into a single lower interest loan with one monthly payment, it is possible to consolidate all of those loans into one new mortgage, slashing interest rates while creating a fixed monthly payment.

At that rate, maintaining a monthly payment on the new mortgage loan, someone could be debt free in just a few years instead of a decade or more of minimum payments.

There are creative ways to handle credit card consolidation, and consolidating into one fixed payment loan is often a good idea, as it leads to a faster payoff. If you attach that loan to an asset like a home, you can get a far lower interest rate than the 20% APR or more many credit cards charge.

If you have debt on multiple credit cards and want to consolidate to another credit card, that is a fair option as well. Just read the fine print on the new card first, and make sure it charges a lower interest rate than your current cards.

Making fewer payments each month is not worth it if it will cost you more in the long run than you would pay without consolidating. In some cases, it might make sense to consolidate some cards and not others. Everyone’s personal financial situation is unique, so there is no right or wrong answer on whether or not you should go through with the credit card consolidation.

Before we dig in deeper, let's define consolidation: it means merging your credit card balances into one, new balance somewhere else.

Taking advantage of 0% APR offers

If you are going to consolidate debt and have a good credit score, you have more options than those with poor credit. A better credit score means you are more likely to be approved for a new credit card with a 0% APR balance transfer offer, which can help you quickly save a small fortune on credit card interest.

There are several great 0% balance transfer offers available at any given time. When looking for a balance transfer credit card, you may be able to find one that offers a year or more at 0% APR. This gives you an opportunity to make huge strides paying off your debt in a short period of time.

Just be aware that the 0% APR goes away at some point, and then full interest kicks in. If that interest rate is worse than your current debt, the 0% offer may not be worth it. That depends on how much debt you can pay down during the 0% introductory period.

Most credit cards charge something like 3% to 5% of the balance transferred, with a $5 or $10 minimum. While that might feel like a reason to avoid a credit card balance transfer for credit card consolidation, it is usually negligible compared to the monthly interest you pay on the current debt.

If you can move from a card that charges 25% APR to one that charges 0% for the first year and you only have to pay 3%, it is likely worthwhile.

The trick to making this work for you, rather than against you, is to be very aggressive on your debt payoff during the 0% period. Try to maintain the same debt payment you made on your old credit cards even if you have a lower minimum payment.

Pay as much as you can possibly afford and you might see your debt go down to the coveted $0 balance. That should save you money while simultaneously boosting your credit score. That is a serious big win for your finances.

Pay off your debt for good

Credit card consolidations can be a game where you move money around, paying fees and interest to keep your debt alive. But living with debt causes long-term stress and harm to your finances. Instead of handing your money over to a credit card company each month, wouldn’t you rather keep it for yourself? That is the true reason to do a credit card debt consolidation.

For some households, a credit card consolidation is the wrong move and would lead to more interest costs and other hassles. But if you do the math and it makes sense for your finances, there is no reason to avoid a credit card consolidation.

It can save you money, help you pay off your debt faster, and once you get there you can stay out of credit card debt for good. You may even be able to go as far as to turn a monthly struggle to pay the bills into an opportunity to put money into savings each month.

If you can do that, you’re on track for long-term personal finance success. That’s what it’s all about.

Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated April 24, 2018 but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

Our editors independently research, test, and recommmend the best products; you can learn more about our review process here. We may receive commissions on purchases made from our chosen links.

Article Staff

Eric Rosenberg is a finance, travel, and technology writer in Ventura, California. He is a former bank manager and corporate finance professional who left his day job in 2016 to take his online side hustle full-time.

Eric has written for sites such as Huffington Post, Business Insider, Forbes, Entrepreneur, Kiplinger, Mint, and Money.

Eric has two finance degrees (BSBA from the University of Colorado and MBA from the University of Denver) and has professional work experience as a bank manager and in corporate finance and accounting in the telecom and payments industries.

He has in-depth experience writing about banking, credit cards, investing, and other financial topics, and is an avid travel hacker.

When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers, and spending time with his wife and little girls. You can connect with him at Personal Profitability or

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