How Do I Consolidate My Credit Cards?


When you’re looking at several credit cards with balances, it can feel as though you have few options. It’s difficult, too, because you have all of those separate payments and interest rates. By the time you pay a little more than the minimum on each — and sometimes even if you take a a debt snowball or debt avalanche approach — it can still feel as though you are completely depleting your budget each month.

One way to make your credit card debt a little more manageable is to consolidate your credit cards.

How Does Credit Card Consolidation Work?

With credit card debt consolidation, you take all of your credit card balances and put them in one place. In many cases, it means that you just make one payment, and only have to worry about one interest rate. This can help you manage your debt more effectively as you pay it down, and the fact that you aren’t dividing up your payments can help you reduce your debt at a faster rate.

When you consolidate your credit cards, there are two main options:

  1. Get a debt consolidation loan: You can get a larger loan and use that loan to pay off your credit card balances. Your new loan only has one payment and one interest rate, and that can improve the efficiency of your payments.

  2. Balance transfers: You can use a credit card balance transfer to consolidate some of your debt (and maybe even get a 0% APR for a short period of time) or you can get another type of loan, such as a personal loan or a home equity loan.

  3. Debt consolidation companies: It’s wise to be cautious when dealing with debt consolidation companies because many of them will charge you excessive fees. And some companies call advertise “debt consolidation” that is actually more like a debt management plan or debt settlement. You need to make sure that any company you work with is reputable.

Consolidating your credit cards is about doing what you can to make the whole situation more manageable. With the right approach, though, it can also help you reduce what you pay over time and help you pay off debt quicker.

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Peer to Peer Consolidation Loans

One of the ways you can get a consolidation loan for your credit cards is by going to a peer-to-peer lender like Prosper or LendingClub. These lenders are different than other lenders in that they match up individuals who want to “invest” and earn a return on their money with individuals who need a low-cost consolidation loan. The advantage of this situation is that the interest rates on peer-to-peer consolidation loans are sometimes lower than what you might get a bank or credit union (although it’s always good to shop around and compare rates before signing on the dotted line).

To learn more about the differences between peer-to-peer consolidation loans and other types of debt consolidation, take a look at our Debt Consolidation resource center.

Working Out Your Own Plan

If you’re looking for an alternative to debt consolidation for your credit card debts, consider putting together an automated plan that feels like debt consolidation, even if it isn’t. There are tools like ReadyForZero that can help you create a personalized plan for paying off debt efficiently. Then, you can use these same tools to automatically make payments so that you don’t have to try to manage your debt repayment on your own. This effort can feel like consolidating your credit cards, but you don’t have to get another loan or try to figure out if you’re working with a reputable debt consolidation company.

The important thing is not so much whether you consolidate as it is that you have a plan, and a good way to easily manage that plan to help you get out of debt as quickly as you can. Also, remember that a key drawback to credit card consolidation is the fact that there is the potential to free up a bunch of credit cards again. To avoid getting back in debt, you have to be ready to change your habits, and have the discipline to avoid racking up more debt. Although canceling your cards can hurt your credit score, if you need to do that to protect yourself from falling back into debt then you should.

Image credit: lobzik

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  • “Cancel your cards if necessary to protect yourself from falling back into debt.” Miranda, that’s usually not a good idea. Canceling your cards can lower your credit score by reducing your balance-to-limit (utilization) ratio. Put the cards somewhere out of sight and out of mind, but don’t cancel them.

    • Hence the IF NECESSARY. Many people, even if putting the cards out of sight, end up in worse trouble. They eventually go looking for those cards, thaw them out of the ice, or whatever. Unless habits are changed, things can get worse. If you don’t have the discipline to stay out of it, it’s better to take the necessary step of canceling the credit cards than it is to wind up in an even worse debt position.

      • But surely you should have mentioned the consequences of your advice, if you knew. If you were a financial planner sitting across from a client, you would be required to. I think the same standard of care should apply to advice given to a mass audience.

        • Hi Hal, I think this point was clear to me in the original but may not have been clear to some readers, so I’ve updated the post to reflect the point you’ve made.

  • Tamara

    I make every effort to pay my credit cards on time I have not have a late payment on my credit cards, but it is so hard to get a consolidation loan, and every time you get denied it counts as an inquiry. Doe anyone have any suggestion or means of securing a loan for someone with poor credit. I just need a loan of 3500 and am financially able to make the payments since I pay my credit cards on time each month. Please help