Consolidating Credit Card Debt

Consolidating credit card debt can be a smart play when your wallet is starting to look like a blackjack deck of credit cards. Especially so when shouldering the financial obligations they represent is also becoming a burden. The key is to catch the problem before it starts to have a negative impact on your credit score. This will give you a shot at the best consolidation loans out there.

What Are Consolidation Loans?

The easiest way to define credit card consolidation loans is debt you take on to combine multiple credit card bills into one. This can take the form of a credit card balance transfer, a consolidation loan, a home equity line of credit or a debt management program.

Let’s take a look at each of these options in more detail.

Balance Transfer Cards 

Credit card issuers often send these offers to customers with strong credit scores. Essentially, they allow you to combine the balances of multiple cards onto a new card with a limit high enough to encompass the shifted balances.

The key here is to ensure the introductory rate is low enough to afford you a significant advantage overpaying all of the cards separately.

You have to be careful with this one though.

These cards usually come with a super low teaser rate — sometimes even 0% — for a limited time frame of anywhere from 18 to 24 months. That rate tends to rocket into the 20% range or higher once that window closes and the new rate can be applied to the entire transferred amount — as of the date you accepted the card — even if most of that amount has been paid.

To win at this strategy, you have to be careful to transfer no more than you can pay in full within the grace period.

Consolidation Loans

There are a variety of loans you can take to accomplish consolidation. These range from personal loans backed by your signature to home equity loans against which you pledge your home as collateral.

The advantage here is the monthly payment is consistent, as there is no teaser rate of which to be aware. Moreover, interest rates on these loans are considerably lower than those of balance transfers once the grace period closes.

Home equity loans offer even better interest rates and the capability of using the interest as a tax deduction. However, these entail trading unsecured credit card debt for secured mortgage debt. This means you could lose the property pledged as collateral if your ability to service the loan goes awry. You can learn more about consolidation loans at

Debt Management Plans 

While not exactly a consolidation plan, or a loan at all for that matter, going with debt management does have the advantage of combining all of your credit card bills into one monthly payment. You’ll send the money to a credit counselor, who will then make the payments on your behalf.

This option is for those who have already encountered problems making payments, as opposed to those who see trouble brewing on the horizon. The debt manager can negotiate lower interest rates on your behalf and sometime even a waiving of any accumulated fees in some cases.

However, your card issuer usually wants to see you’re in trouble before agreeing to accept to one of these deals. You might find your management offers being turned down if trouble has yet to become apparent.

A Word to The Wise

Rather than paying it off, consolidating credit card debt moves it around. You still owe the money, even though all of the cards from which the obligations were consolidated will have zero balances. You might be tempted to use those cards again, which would be a significant mistake.

Doing so would place you in a situation in which you’ll still have the original debts to pay. Along with the new ones you’ll incur. While it’s important to your credit history to keep those accounts open, it’s equally important to your finances to leave the cards in a drawer somewhere unused.