5 Ways to Consolidate Credit Card Debt

Consolidating your credit card debt may be a good idea if the new debt has a lower APR than your credit cards.
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Written by Jackie Veling
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Edited by Kim Lowe
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Many people struggle with credit card debt at one point or another, and the higher your balances, the harder it can be to pay them off, especially when you consider compounding interest.

Consolidation is a way to move high-interest debt onto a lower-interest product, like a balance transfer credit card or a credit card consolidation loan, which then makes it easier to pay off. But this strategy isn’t for everyone, and you should weigh your consolidation options carefully.

The best choice will depend on how much debt you have, your credit score and other factors explained below.

Best ways to consolidate credit card debt

Here are five effective and safe ways to pay off your credit card debt:

1. Roll your debts onto a balance transfer credit card


0% introductory APR period.

A year or more to pay off debt without interest.


Requires good to excellent credit to qualify.

Usually carries a balance transfer fee.

Higher APR kicks in after the introductory period.

Also called credit card refinancing, this option transfers credit card debt to a balance transfer credit card that charges no interest for a promotional period, typically 15 to 21 months. You’ll need good to excellent credit (690 credit score or higher) to qualify for most balance transfer cards.

A good balance transfer card will not charge an annual fee, but many issuers charge a one-time balance transfer fee of 3% to 5% of the amount transferred. Use NerdWallet’s balance transfer savings calculator to see whether the interest you save over time will wipe out the cost of the fee.

Aim to pay your balance down completely before the 0% intro APR period is over. Any remaining balance after that time will have a regular credit card interest rate.

2. Apply for a credit card consolidation loan


Fixed interest rate means your monthly payment won’t change.

Low APRs for good to excellent credit.

Direct payment to creditors offered by some lenders.


Hard to get a low rate with bad credit.

Some loans carry an origination fee.

Credit card consolidation loans, also called debt consolidation loans, are fixed-rate loans that come in a lump-sum, ranging from $1,000 to $50,000, with terms up to seven years. You can apply for a consolidation loan at your local credit union, bank or through an online lender.

Credit unions are not-for-profit lenders that may offer their members more flexible loan terms and lower rates than other lenders, especially for borrowers with fair or bad credit (689 credit score or lower). The maximum APR charged at federal credit unions is 18%. You’ll need to become a member before you apply for a consolidation loan, but membership is typically quick and affordable.

Bank loans provide competitive APRs for good-credit borrowers, and benefits for existing bank customers may include larger loan amounts and rate discounts. If you have a good relationship with your bank, ask what their consolidation options are before committing to another lender.

Online lenders offer debt consolidation loans for borrowers across the credit spectrum, so they’re a good option if you can’t qualify through a credit union or bank. Most online lenders also let you pre-qualify without affecting your credit score, which is less common among banks and credit unions. Pre-qualifying gives you a preview of the rate, loan amount and term you may get once you formally apply.

Look for lenders that offer special features for debt consolidation. Some lenders, for example, will discount the rate on a debt consolidation loan or send the loan funds directly to your creditors, simplifying the process.

Use NerdWallet’s debt consolidation calculator to enter all of your debts in one place, see typical rates from lenders and calculate savings.

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3. Tap your home equity for a loan or line of credit


Typically lower interest rates than personal loans.

May not require good credit to qualify.

Long repayment period keeps payments lower.


You need equity in your home to qualify, and a home appraisal is usually required.

Secured with your home, which you can lose if you default.

If you’re a homeowner, you may be able to take out a loan or line of credit on the equity in your home and use it to pay off your credit cards or other debts. This is an option for borrowers who can’t qualify for credit elsewhere.

A home equity loan is a lump-sum loan that you pay back with a fixed interest rate, meaning you’ll have predictable monthly payments and a clear finish line. However, these loans are less flexible than a line of credit, which works like a credit card with a variable interest rate.

A HELOC, or home equity line of credit, often requires interest-only payments during the draw period, which is usually the first 10 years. That means you’ll need to pay more than the minimum payment due to reduce the principal and make a dent in your overall debt during that time.

Since both of these types of credit are secured by your house, you’re likely to get a lower rate than what you would find on a personal loan or balance transfer credit card. However, you can also lose your home if you don’t keep up with payments.

4. Borrow from your 401(k)


Lower interest rates than unsecured loans.

No impact on your credit score.


Reduces your retirement fund.

Heavy penalty and fees if you can't repay.

If you lose or leave your job, you may have to quickly pay back your loan.

If you have an employer-sponsored retirement account like a 401(k) plan, you can typically borrow up to half the amount (with a $50,000 maximum), for a term up to five years, to help pay off your debts. These loans usually come with single-digit interest rates, so they’re much cheaper than credit cards, and any interest you pay goes back into your account. Another benefit is this loan won’t show up on your credit report, so there’s no impact on your score.

But taking out a 401(k) loan is very risky. Not only can it significantly impact your retirement savings, if you can’t repay, you’ll owe a hefty penalty plus taxes on the unpaid balance, and you may be left struggling with more debt.

Plus, if you lose your job or quit, the loan is automatically due on tax day of the next year.

Consider a 401(k) loan only after you’ve ruled out balance transfer cards and other types of loans.

5. Enter a debt management plan


Fixed monthly payments.

May cut your interest rate by half.

Doesn't hurt your credit score.


Startup fees and monthly fees are common.

It may take three to five years to repay your debt.

Debt management plans roll your credit card balances into one monthly payment at a reduced interest rate. You then pay it off over three to five years. These plans work best for those who are struggling to pay off credit card debt but don’t qualify for other options because of a low credit score.

Unlike other credit card consolidation options, opting into a debt management plan won’t hurt your credit score, and if you’re able to make payments on time, it should help.

But debt management plans typically come with fees, so you’ll want to verify the fee amounts and how they affect your overall payoff plan before making a commitment. Going through a nonprofit credit counseling agency is a good way to find an affordable debt management plan.

If your credit card debt is more than 40% of your income and can’t be repaid within five years, bankruptcy may be a better option than a debt management plan.

What is credit card consolidation?

Credit card consolidation is when you use another credit product to pay off your credit card balances in one fell swoop. You’re then left with only one payment on your new debt.

For consolidation to make sense, the new debt should have a lower annual percentage rate than your credit cards, so you save money on interest. You can even apply that savings back to your debt, which will shorten the payoff period and get you out of debt faster.

How does credit card consolidation work?

Credit card consolidation works by using a different credit product to pay off your credit card balances at a lower interest rate. The logistics depend on which product you choose.

For example, if you go with a credit card consolidation loan, you’ll need to apply for the loan with a bank, credit union or online lender. Once approved, you’ll receive the money in your account, which you can use to pay off your credit cards.

If you have $10,000 in debt across four credit cards, you’d apply for a $10,000 loan then individually pay off each of the four cards (some lenders offer to pay off your cards for you). You’re then left with one fixed payment on the consolidation loan, which you make monthly, until the loan is paid off in full.

Is consolidating credit card debt a good idea?

Consolidating credit card debt is a good idea if you can qualify for a low enough interest rate and pay off the debt during the allotted time period, which will vary based on the consolidation product you choose.

You’ll also want to be certain you can keep your credit card balances at or near zero while you pay off the new debt. For example, if you take out a consolidation loan to pay off your credit cards, but then accumulate a balance on your credit cards again, you’ll be in a worse position than when you started.

Can I still use my credit card after debt consolidation?

If you consolidate your credit cards, you can still use them. Consolidating just means you’re paying them off, so your balances will be at zero, but the cards themselves will remain open unless you take the step of closing them.

Closing a credit card can hurt your credit score. Financial experts often suggest tieing a small recurring expense, like your monthly phone bill, to the card to keep it active. Avoid paying for nonessential expenses with your credit card, since this could delay getting out of debt.

Frequently asked questions

Debt consolidation rolls multiple debts, like high-interest credit cards or loans, into a single payment.

The best way to consolidate credit card debt depends on how much debt you have, your credit score and what existing financial resources you can pull from, but popular options include balance transfer cards and consolidation loans.

A debt consolidation loan might be better than paying off credit cards on your own if you can qualify for a lower interest rate than the average rate on your cards. This would reduce interest costs, lower your monthly payment and potentially get you out of debt faster.

Debt consolidation affects your credit in a few ways. Your credit score may temporarily dip when a lender or card issuer does a hard credit inquiry. Making a late payment on your consolidation product can also hurt your credit. But if you pay on time and stay out of debt in the future, the overall effect could be positive.

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