Should I take out a line of credit to pay off my credit card debt? (2024)

Dear #MoneyChat:

I have about $4,500 in credit card debt and have been making the minimum payments plus a little extra. But I still feel like I can't get ahead and get the balance down due to interest. Someone mentioned using a line of credit to pay down my credit card debt but I'm still not sure if this is a good idea. What are your thoughts?

Dear #MoneyChatter:

It might seem like a contradiction to use debt to pay off debt, but taking out a line of credit to pay off credit card debt can be a great financial decision depending on your situation.

Because you can usually get a line of credit at a lower interest rate than your credit card, using a line of credit to pay off credit card debt can reduce your total interest costs and reduce the amount of time you’re in debt. The goal is to secure a lower interest rate and I would at least explore this option to see if it's a good fit for you.

Most banks offer lines of credit, but you must meet certain credit score requirements. For example, U.S. Bank offers a line of credit up to $25,000 with interest rates as low as 12.50% APR but you must have a minimum credit score of 680 to qualify.

Another option (if you have good or excellent credit) is to get a balance transfer credit card. Most of these cards charge a fee of 3% to transfer your balance, but you can get a 0% APR typically from 12 to 18 months. This gives you time to pay down your balance interest-free.

Just be sure to reign in your spending while trying to pay down this balance and realize that to be considered for either option, you'll have to be in good standing with your credit card issuer so continue to make payments on time.

xoxo

Your Financial Coach,

Dorethia

P.S - Have you used a line of credit or balance transfer? What are you doing to pay down credit card debt this year?