Should You Consider Consolidating Credit Card Debt?

/ Financial Tips / 4 minutes of reading

Should You Consider Consolidating
Credit Card Debt?

Juggling multiple credit card payments each month can be stressful, especially if you have big balances on high-interest cards. So is credit card debt consolidation the solution?

The answer will depend on the nature of your current debt and whether you have a solid plan to stay out of debt. Our checklist is here to help you decide if it’s the right time to consolidate your credit card debt!

How Debt Consolidation Works

Debt consolidation is when you combine multiple debts into one account so you have fewer monthly payments and can hopefully save on interest. 

The most common ways to consolidate debt are: 

For both options, you use the new credit source to pay off all or some of your existing credit card debt. Then you start making payments on your new loan or credit card. 

Considering Credit Card Debt Consolidation Checklist

Now that you understand debt consolidation, let’s find out if it’s right for you!

  • You’re Struggling to Make Your Payments

If you feel like you’re drowning in credit card debt – and are behind on payments or in danger of missing payments – then it might be time to think about debt consolidation. 

You want to take steps to get on top of your finances before you fall behind. A debt consolidation loan or balance transfer card could give you a single payment (or fewer payments) so you can manage your finances more easily – and sleep better at night.

Keep in mind that missed payments can negatively impact your credit score, which may make it harder to secure a new source of credit to consolidate your debt. Lower credit scores also mean higher interest rates.

  • You Know You’re Paying Too Much Interest

Maybe you’re better informed now about what credit card rates are available from different lenders, or maybe your credit score has improved since you applied for your cards so you can now qualify for a better rate. 

If you have multiple credit cards with high APR, chances are you’ll pay less total interest per month through a debt consolidation loan or a new credit card with a more competitive rate.

  • Your Credit Is in Good Shape

You probably know that your credit score helps determine the rates you get. The better your credit, the lower your rates! So if your credit score is good, you’ll likely qualify for a great rate on a debt consolidation loan or a new credit card to transfer your debts.

Credit card debt consolidation lets you pay off your old credit cards. Then if you keep those accounts open with a zero balance, you’ll suddenly have much more available credit. This can give your credit score a further boost.

On the other hand, if your credit is less than perfect right now, you may not qualify for a better APR than what you have on your current credit cards.

  • You Have a Plan to Stay Out of Debt

Once you’ve used your debt consolidation loan to pay off your debts, you can free up your income for more beneficial things. But you need to come up with a budget – and stick to it – so you don’t quickly revert to using your credit cards to cover the same expenses as before.

To avoid falling into further debt, you should avoid using your credit cards until your debt is paid off in full (or at a manageable level). It may mean you have to wait to buy things that you used to charge! 

Find Out How to Consolidate Your Credit Card Debt 

Consolidating credit card debt is easy! Just take a close look at your current credit card payments, then compare the numbers to what you might get through a low-interest debt consolidation loan or a credit card with a better rate. 

If it seems like you’ll be better off after your credit card debt consolidation, you can go ahead and make the switch.  Learn more about consolidating your debts today!

How to Consolidate Your Debt
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