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8 Credit Card Consolidation Strategies

8 Credit Card Consolidation Strategies
Jason Steele
Jason SteeleUpdated February 4, 2022
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It can be harder to pay numerous credit card balances than it is to pay down a single debt. That’s not only because there’s additional labor required to issue payments to numerous accounts, but also because it takes a psychological toll on you each month when you receive multiple bills reminding you of your unpaid balances. Having multiple outstanding balances can also hurt your credit score, compared to having a single creditor. Thankfully, there are credit card consolidation options that can make paying off your debt much easier, from balance transfer credit cards to various types of loans.

What Is Credit Card Consolidation?

When you have outstanding balances on numerous credit cards, there are ways to combine those balances into a single account, called consolidation. These balances can be combined into one of several types of other loans, including that of another credit card. If you’re unsure of how this process works, check out our article on debt consolidation 101.

How Does Credit Card Consolidation Work?

When you want to consolidate credit card debt, you’ll use another loan or line of credit to pay off your existing accounts. This essentially transfers your debt from multiple existing accounts to a new one. So, for instance, you may transfer all of your debts onto a balance transfer credit card with a promotional 0% APR period, and then aim to pay off your debts within this timeframe (though note you’ll often need a good credit score to qualify for these cards). Why consolidate credit card debt? By doing so, you will then have a single debt with just one monthly payment. And ideally, you’ll transfer your balances to a loan that has a lower interest rate, and perhaps even a lower monthly payment amount. 

Pros and Cons of Credit Card Consolidation

When you’re learning how to consolidate credit card debt, you’ll start to realize there are several advantages and drawbacks that you’ll want to consider:
Pros of credit card consolidationCons of credit card consolidation
You’ll have fewer monthly paymentsYou may have to apply for a new account.
There’s the potential to improve your credit score.It takes planning and work to complete multiple balance transfers.
You may reduce your interest rates.You may have to pay balance transfer fees.
You’ll have less stress thanks to fewer payments.You may not necessarily qualify for a lower interest rate.
Of course, the primary advantage of credit card debt consolidation is that you’ll have to make fewer payments each month, which can result in less work and less stress. Having fewer accounts with balances can also improve your credit score. With an improved credit score, you could then potentially receive a lower interest rate when you open a new account or take out a new line of credit to consolidate your loans. This can save you money on interest charges while allowing you to pay off your debts sooner. On the other hand, there are some drawbacks to credit card consolidation. First, you’ll likely have to shop for and apply for a new loan or line of credit. The application process can be time-consuming, and if approved, you’ll spend even more time transferring each of your existing credit card balances to the new account. Furthermore, you will almost certainly incur credit card balance transfer fees, or other fees for applying for other types of loans or lines of credit. Take the time to weigh these costs against your potential savings before moving forward with credit card consolidation.

Credit Card Consolidation Strategies: 8 Ways to Consolidate Credit Card Debt

Before beginning a credit card debt consolidation strategy, you’ll have to select a strategy and the type of loan that best meets your needs. 

1. Balance Transfer Credit Cards

When you learn what balance transfer credit cards are, you’ll understand why they can be perfect for credit card consolidation. As its name suggests, a balance transfer credit card allows you to to transfer balances from other accounts. Using a balance transfer card could be one of the easiest credit card consolidation strategies, as you can simply apply for a new credit card online. The ideal balance transfer credit card will have the longest possible promotional financing period with 0% APR, as well as a low balance transfer fee. Promotional financing periods last at least six months, but the most competitive offers can be 15-18 months or longer. Expect to pay a 3% balance transfer fee, although some offers have a 5% fee. Once the promotional rate expires, the standard APR will apply. To start your search, you can begin by looking at our roundups of the top balance transfer cards and the top zero interest cardsPros: 
  • Balance transfer credit cards are easy to apply for.
  • You’ll find numerous offers available.
  • Interest-free financing is offered, though for a limited time.
  • Offers are usually reserved for those with good and excellent credit.
  • You won’t know your credit limit until after you’ve been approved.
  • A balance transfer fee of 3% to 5% will apply.

2. Credit Card Consolidation Loans

Another potential strategy is a credit card consolidation loan, which is an unsecured personal loan from a credit union, bank, or online lender. These loans will have fixed rates and a fixed payment, giving you some predictability. Ideally, you can receive a credit card consolidation loan with a lower interest rate than your current credit card balances, but that will depend on your creditworthiness. Because of this, it’s worth taking the time to compare personal loans that are available to you.Pros:
  • Payments can be made directly to lenders.
  • Fixed rates and payment amounts offer predictability.
  • Lower APRs may be available.
  • There can be origination and other fees.
  • These loans may not be available to those with bad credit.
  • The application process is longer compared to balance transfer credit cards.

3. Home Equity Loan

A home equity loan allows you to borrow a lump sum based on the equity of your home, which is the difference between how much your home is currently worth and how much you owe. You could then use these funds to pay off your credit card debts.Since this is a secured loan, the interest rates can be much lower than unsecured personal loans. However, your home is on the line if you default on the loan. Also, keep in mind that you’ll owe closing costs and other fees.Pros:
  • They offer lower interest rates than personal loans. 
  • These loans can have a long repayment period, keeping payments low.
  • There are generally less stringent credit requirements. 
  • You must own property with significant equity. 
  • There can be origination and closing fees.
  • You risk losing your home if you default. 


A HELOC, which stands for home equity line of credit, is similar to a home equity loan, but it’s a revolving line of credit. In many cases, this allows you to make monthly payments for your interest only, and again, your interest rate will be lower compared to an unsecured loan. You can draw from the line of credit to pay off new debts or other expenses. Again though, your home is serving as collateral.Pros:
  • They offer flexible borrowing and repayment terms.
  • Interest rates tend to be low compared to unsecured loans.
  • There are less stringent credit requirements to qualify.
  • You must have home equity. 
  • There are typically significant origination and closing fees.
  • Interest-only payment options can make it easy to avoid paying down debt. 

5. 401(k) Loan

If you have a 401(k) retirement savings account, then you may have the option of taking a loan out for the purpose of credit card debt consolidation. This option can offer a lower interest rate than a personal loan, and it doesn’t require a credit check. And because you are essentially both the lender and the borrower, it won’t affect your credit. But be aware that this does entail digging into your retirement savings, and these loans have high fees if you don’t pay it back. Also keep in mind that you'll likely owe a one-time origination fee, though you won’t face taxes and penalties like you would with an early 401(k) withdrawal.Pros:
  • No credit check is required.
  • There’s no effect on your credit.
  • Interest rates are low. 
  • You’re putting your retirement savings at risk.
  • You’ll face high fees if you fail to repay the loan.
  • If you change jobs, you may have to pay back the loan more quickly. 

6. Debt Management Plans

Debt management plans are tools offered by nonprofit credit counseling agencies to help people pay down their debt. They work by creating voluntary agreements between yourself and your creditors. You then make a single payment to the nonprofit agency each month, which is distributed to your creditors. Debt management plans can also help you reduce your interest rates and fees. Pros:
  • You make one payment each month.
  • Your interest rates and fees can be reduced. 
  • You’re assisted by an experienced counselor. 
  • You may be asked to stop using credit cards.
  • The terms of the plan can be derailed if you miss a single payment. 
  • There will be enrollment fees and monthly fees. 

7. Friend and Family Loan

If you have access to a loan from friends or family members, then this could be a simple way to consolidate your credit card balances. You can simply ask a trusted individual to borrow a lump sum, and then pay it back according to an agreement that you come up with between yourselves. These funds can then be put toward paying down your credit card debt.Pros:
  • You’ll have potentially no fees or even interest charges. 
  • No credit checks are needed. 
  • There is no formal application process.
  • You can risk your relationship with family and friends.
  • You can be putting others at financial risk if you fail to repay the loan. 
  • It can be difficult to ask for help.

8. Cash-Out Auto Refinancing

If you own your car outright, or you have significant equity in it, then it may be possible to refinance it and take cash out. You could then use those funds to pay off your other creditors. As a secured loan, you can often receive a relatively low interest rate, even when refinancing. However, keep in mind that with cash-out refinancing, your car is collateral, and there may be other fees involved.Pros:
  • You may get a low interest rate.
  • There are generally fewer fees than other secured loans, such as those against your home equity. 
  • There’s little effect on your credit since you’re just replacing one installment loan with another. 
  • Since vehicles tend to depreciate, you may not have much equity.
  • You risk losing your vehicle if you can’t pay back the loan. 
  • There can still be origination and closing fees. 

Tips on Keeping Your Credit Card Debt From Ballooning

Before you have the need for credit card consolidation, you should try to keep your credit card balances under control. As the old saying goes, when you find yourself in a hole, the best thing to do is to stop digging. Likewise, if your credit card debt is out of control, then you should stop using credit cards as your primary method of payment. When you switch to cash or a debit card, you’ll no longer be incurring credit card debt, which is the first step toward paying off your existing balances. Next, try paying off your smallest balances first. This method, often called the debt snowball method, allows you to see quick results as you immediately reduce the number of creditors you have. And since credit cards charge interest based on your account’s average daily balance, it will help to make payments as soon as possible, rather than waiting for the due date. In fact, you may consider making multiple payments each month. Doing so also prevents you from spending the money on other things, rather than paying down your debt. 

Compare Credit Card Offers

Credit card consolidation can be helpful if you find yourself in a situation with credit card balances on a number of different accounts. There are a number of ways to consolidate those balances into one monthly payment — ideally with a lower interest rate — from various types of credit card consolidation loans to debt management plans to balance transfer credit cards. Whether you’re looking for one of the top balance transfer credit cards or any other type of card, we can help. For more information, check out our credit card comparison.
Photo credit: iStock/dusanpetkovic

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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