How To Consolidate Credit Card Debt

Ben Luthi
how to consolidate credit card debt
how to consolidate credit card debt

For some people, credit cards present an opportunity to spend beyond their means, but for others, credit cards act as a lifeline to cover expenses they can’t afford. Regardless of how credit cards are used, roughly 40% of accounts carry a balance from month to month, according to the American Bankers Association.

Among those who have credit cards, the average balance is $5,221, according to Experian. If you’re concerned about your credit card debt, there are several approaches you can take to tackle it. If you’re wondering how to consolidate credit card debt, here’s what you need to know.

What is credit card debt consolidation?

Consolidating credit card debt involves paying off one or more of your credit card accounts with a different credit card or a loan. Depending on the situation, you may be able to take advantage of a lower interest rate, a more structured repayment plan, and a simpler debt payoff plan.

For credit card consolidation to be worthwhile, you typically need to have good credit. The products you can use to consolidate your balances often require good credit for approval, or for a low enough interest rate to make the process worth it.

With that in mind, here’s how to consolidate credit card debt.

Balance transfer credit card

A balance transfer credit card is a type of card that offers an introductory 0% APR promotion for anywhere between 12 to 21 months. After you use your new card to pay off your existing balances, you can pay down your debt interest-free within the promotional time period.

If you pay off the balance before the promotional period ends, you won’t incur any interest on the debt. But if you have some remaining, you’ll only pay interest on the balance that’s left.

Balance transfer credit cards can also sometimes offer rewards on new purchases and even sign-up bonuses, but if it doesn’t also offer a 0% APR on purchases, you’ll start accruing interest on new charges immediately, so it’s best to stick to the balance transfer feature.

Keep in mind that balance transfer cards often charge a balance transfer fee, which is typically between 3% and 5% of the transfer amount. The card issuer will tack this fee onto your balance rather than requiring you to pay it up front.

Personal loan

Personal loans don’t come with introductory 0% APR promotions, but they can give you a lower interest rate than you’re currently paying. According to the Federal Reserve, the average rate on a two-year personal loan is 10.16%, compared to 18.43% for credit cards.

Like most credit cards, personal loans are also typically unsecured, which means you don’t need to put up collateral to get approved.

Additionally, personal loans are installment loans rather than revolving lines of credit, so instead of a minimum payment and no set repayment plan, you’ll get a fixed monthly payment and a structured repayment term. This can be beneficial if you’ve struggled to stick to your credit card payoff plan in the past.

If your credit is fair or poor, however, you may have a hard time getting approved for a lower interest rate than you’re paying right now.

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Compare Personal Loan Offers From $600 to $100,000

See your monthly payment offers from our marketplace of top-rated lenders in 2 minutes with no impact on credit.

Home equity loan

A home equity loan is a type of secured loan that uses your home as collateral. Home equity loans typically have lower interest rates than personal loans because they’re less risky for lenders.

However, they can also come with expensive closing costs, which eat into your savings — lenders typically charge between 2% and 5% of the loan amount up front.

If you fail to pay back your home equity loan on time, your lender could potentially foreclose on your home to recoup the remaining balance, which could exacerbate your already-challenging financial situation.

Finally, home equity loan eligibility is based on how much equity you have in your home. Some lenders may require you to maintain at least 20% of your home’s equity after the loan is disbursed, though others may go lower than that. On the flip side, depending on how much debt you have, it might not meet minimum loan amounts set by lenders.

If you have less-than-stellar credit, you may still get approved for a home equity loan, but the minimum score required is generally 620.

401(k) loan

If you have a 401(k) plan through your employer, you may have the opportunity to borrow money from your retirement plan to pay off the debt. You don’t have to undergo a credit check to get approved, and any interest you pay goes back into your account.

However, taking money out of your retirement plan means that it’s not earning gains for you until you pay it back, which can end up costing you more down the road. And if you leave your job or get laid off, you may need to pay it all back in a lump sum. If you can’t afford it, the IRS will treat the loan as an early withdrawal, potentially leaving you with a 10% penalty and income taxes on the remaining balance. 

Finally, the IRS limits how much you can borrow with a 401(k) loan based on your account balance, and depending on how much you have invested, it might not be enough.

Debt Consolidation Calculator

Personal loans can be used to consolidate your debt into a single loan with a new rate and term. See how much you can save by entering your loan information below.

Step 1: Enter Current Debt Information

Loan / Credit Card 1

Loan Balance
Your total debt to be repaid.
Interest Rate (APR)
The amount that the lender charges in interest, expressed as a percentage.
Current Monthly Payment
The amount you currently pay each month towards your existing debt
Add Loans or Credit Cards

Step 2: Enter New Loan Information

Interest Rate (APR)
Your new interest rate on your new loan
The lenth of time you have to pay your new loan in full

Add Additional Loans or Credit Cards

Insert additional Loans or Credit Cards

Step 3: See How Much You Can Save

Current Debt Personal Loan Savings
Monthly Payment $600 $483 $117
Lifetime Interest $5,400 $2,399 $3,001
Time to Payoff Debt 2 yrs 10 mos 3 yrs 2 mos

Want to compare personalized prequalified rate offers from top personal loan companies? We’ve partnered with Credible to help get your finances back on track with free rate comparisons — with no impact on your credit score.

Pros and cons of credit card debt consolidation

Regardless of which option you choose, there are both advantages and disadvantages to consolidating credit card debt. Understanding the pros and cons of credit card debt consolidation can help you determine whether it’s right for you and which path to take.


  • It could save you money: If you can secure a lower interest rate, you could save hundreds or even thousands of dollars on interest charges.
  • You could become debt-free sooner: With lower interest charges, you could achieve your goal of becoming debt-free sooner than you would have if you’d kept your debt where it is.
  • It could simplify your life: If you have multiple credit card balances, consolidating them all into one new card or loan could make your debt payoff plan easier to manage.


  • You may not qualify: Most credit card consolidation options require good or excellent credit to get approved, or at least to obtain an interest rate that’s low enough to make the process worth it. And while a 401(k) loan doesn’t require a credit check, not all employer plans offer that feature.
  • You may not get enough: Depending on your situation, you may not get a high enough credit limit to transfer all of your credit card debt over to a new card. The same is true for loan options. If consolidation doesn’t help resolve all of your credit card debt problems, you may continue to struggle.
  • It may make things more complicated: Applying and opening new credit accounts can negatively impact your credit score. That can be worth it if you have a lot of debt and stand to gain hundreds or thousands of dollars in interest savings. But if you don’t have a lot of debt or you can feasibly pay it down without consolidating, it may make sense to avoid it.

When does credit card debt consolidation make sense?

Every situation is different, so there’s no one-size-fits-all answer to this question. However, there are situations where it might make more sense than others:

  • You have a lot of credit card debt, and you’re struggling to manage it.
  • You have good credit and can get approved for a balance transfer card or loan with a lower interest rate.
  • You can afford the new monthly payment on a loan, or the higher monthly payment required to pay off the balance on a 0% APR promotion.
  • You have multiple monthly payments and want to simplify your budget.
  • You have a plan to stay out of debt.

How to manage your finances after consolidating

Credit card consolidation can help improve your financial situation, but only if you have a plan to stay out of debt after you pay off your current balances. If you move your debt to a new card or consolidate it with a loan and then rack up a new balance on the original card, consolidation could do more harm than good.

Some steps you can take include:

  • Stop using your credit cards, at least while you pay down your debt.
  • Get on a budget to manage your spending.
  • Start saving for emergency expenses to avoid surprises in the future.
  • Rethink large expenses that could be difficult to pay off immediately.
  • If you decide to keep using your credit cards, set a goal to pay off charges every month in full.
  • Avoid costly cash advances.

The bottom line

Depending on your situation, credit card debt consolidation can help you save hundreds or even thousands of dollars in interest charges. But it’s not for everyone. As you research your options along with their advantages and disadvantages, take time to consider the best path forward for your situation.

As you shop around and compare credit card consolidation methods, you can get rate estimates on consolidation loans with Purefy. This process can make it easier to see what you qualify for and compare available offers to ensure you get the best deal available to you.

Outsmart Rising Credit Card Interest Rates With a Personal Loan

Credit card APRs often exceed 20%. Get your finances on the right track today with a quick & easy personal loan from our marketplace of top-rated lenders

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