How to consolidate credit card debt in 7 steps (2024)

Jennifer Brozic is a personal finance writer and has written for Citi. Editorial Note: IntuitCredit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

Credit card debt consolidation involves combining multiple credit card balances into a single monthly payment that’s easier to keep track of.

The benefits of credit card debt consolidation include simplifying your finances so that you can focus on making one monthly payment, and hopefully, lowering your interest rate to help reduce your payment and save money in interest.

To help you decide if credit card consolidation is right for you, here are several methods to consider.

• What is credit card debt consolidation?
• How to consolidate credit card debt
• Is credit card consolidation right for you?
• FAQs about credit card debt consolidation

What is credit card debt consolidation?

If you’re struggling with credit card debt, debt consolidation may help you manage your debt. Credit card debt consolidation works by using balance transfer cards or loans to pay off your credit card debt. Then, you’re left with one monthly payment to manage instead of multiple. Plus, if you get a lower interest rate on your loan you may end up saving money in the long run.

How to consolidate credit card debt

If you’re looking to consolidate your credit card debt, you have some options. Keep reading to learn about our top picks on how to consolidate credit card debt.

1. Use a balance transfer credit card

A balance transfer lets you move balances from one or more credit card accounts to a different card.

This could be the best way to go if you plan on paying off your debt within a year or two. That’s because balance transfer credit cards often offer an introductory 0% APR on balances you transfer for a short amount of time.

Pros: If you pay off the balances you transfer before the introductory period expires, you could avoid paying interest charges on the transferred balance altogether.

Cons: The promotional period is limited. If you don’t pay off the amount you transfer (in full and on time) before the intro period ends, the remaining balance will accrue interest at the card’s regular rate.

In addition, some cards charge a balance transfer fee, which will add to the debt you must repay. Also, the amount you transfer — including any fees charged — can’t be higher than your credit limit, which may not be high enough for you to pay off all your debt.

Keep in mind that you may not be allowed to transfer balances between cards issued by the same lender. And if you opt for a balance transfer, it’s especially important to pay on time because late payments may cancel the introductory APR offer.

Our balance transfer calculator can help you estimate how much a balance transfer could save you.

2. Apply for a personal loan

If you need more time to pay off your credit card debt, applying for a personal loan might be a better choice.

While personal loans typically charge lower interest rates than credit cards, you probably won’t find one that offers an introductory 0% APR like some balance transfer credit cards do.

Pros: If you have good credit, you may qualify for a lower interest rate on a personal loan than the rates your credit card issuers are charging. Personal loans offer flexible repayment terms, so you can select the one that’s right for your budget. Plus, some lenders will send payment directly to your creditors, so you won’t be tempted to use the loan funds for something else. And many lenders offer the option of applying for prequalification, so you can shop around to see what your potential options are without affecting your credit scores.

Cons: You need to meet the lender’s eligibility requirements to qualify for a personal loan. If you’ve had financial difficulties in the past, you may not be eligible, or you may only qualify for an interest rate that’s comparable to the current rate on your credit cards. In addition, some lenders charge an origination fee, which could add hundreds of dollars to the cost of your loan, which could eat into your loan funds before you even receive them.

3. Work with a nonprofit credit counseling organization

Credit counseling organizations can review your entire financial situation and work with you to create a plan to tackle your financial challenges. They give advice about credit issues, budgeting, money management and debt management.

If you work with a credit counselor, it’s important to research the organization before you get started. Check with your state attorney general’s office and consumer protection agency to ensure it’s reputable.

Pros: A credit counseling organization may work with your creditors to set up a debt-management plan on your behalf, which requires you to make a single monthly payment to the credit counseling organization each month. The organization then uses the money you provide to pay your creditors. Your credit counselor may also work with your creditors to negotiate lower interest rates or waive certain fees.

Cons: Some credit counselors may charge a fee for some of their services, and you may have to agree not to apply for new credit or use your existing credit if you participate in a debt-management plan.

4. Ask a friend or family member for help

Depending on how much money you owe and what your overall financial picture looks like, it may make sense to ask a friend of family member to lend you the money.

But if you opt for this method, it’s important to be sure the loan terms and repayment plan are clearly outlined, just as they would be if you were getting a loan from a financial institution.

Pros: When you borrow money from somebody you know, you don’t have to meet minimum eligibility requirements to qualify for the loan, and you may be able to get a lower interest rate than you would from a bank or credit union.

Cons: Borrowing money from someone you know is tricky because it can put a strain on your relationship. Also, if you’re unable to repay the loan on time, you might be putting their finances at risk.

Editors’ note: The following are other credit card consolidation methods that are available, but be aware that they’re riskier than the options we’ve discussed above.

5. Cash-out auto refinance

Some lenders offer cash-out refinance auto loans that allow you to borrow against the equity in your car for other expenses, like consolidating credit card debt.

Pros: You may be able to get a better interest rate on your auto loan along with cash to pay off credit card debt.

Cons: You’ll increase your debt with a cash-out auto refinance, and if you’re unable to make your payments, you risk losing your vehicle. Consider this option a last resort.

6. Home equity loan

Home equity loans let you borrow against your home’s equity and use the cash to pay for just about anything.

Pros: This may seem like a good option because these loans often have lower rates than credit cards and personal loans.

Cons: If you default on payments, the lender typically has the right to start foreclosure proceedings, and you could lose your home. As with a cash-out auto refinance, we suggest exploring other debt consolidation options first.

7. Retirement account loan

If you participate in an employer-sponsored retirement account such as a 401(k) or 403(b), it may be tempting to use some of those funds to pay off your debts. But the drawbacks may outweigh the benefits.

Pros: Retirement account loans don’t require a credit check as long as your plan offers a loan option — some don’t — and interest rates are typically lower than what you’d pay at a bank or other lender.

Cons: If you’re unable to make your payments, the amount you withdrew could be taxed, and you might have to pay a penalty on top of that. Since the funds you borrow won’t earn interest, you’re missing out on an opportunity to grow your retirement income.

FAQs about credit card debt consolidation

What’s next?

Consolidating your credit card debt into a single payment may seem like the solution to your financial troubles, especially if you can get a lower rate.

Before consolidating your credit cards though, come up with a budget that will help you minimize your spending while you’re paying down your debt. You can also use our debt repayment calculator to estimate how long it could take to pay off your card debt. Once you have a plan, you can choose the credit card debt consolidation method that’s right for you.