The best ways to consolidate credit card debt

Done properly, a debt consolidation loan can have two big advantages:

  1. Because you’re turning multiple forms of credit into one single loan, you only have one monthly payment to manage
  2. If the interest rate on the debt consolidation loan is less than the interest you’re paying on your existing debts, you’ll usually save money too

That’s a quick summary, but if you want more information on debt consolidation loans in general, we’ve also written a full guide to help you find out whether a debt consolidation loan is right for you[1].

In this article, we’ll focus on how you can consolidate credit card debt specifically, answering some of the most important questions and giving you tips on how you can save money in the process.

Why would I consolidate credit card debt?

Credit card debt is a unique form of revolving debt. Unlike personal loans, where you make fixed repayments and pay it off in full over a specified period, credit card debt has no term.

That means that it is one of the few types of debt which you can keep rolling over. This can be tempting, but also carries higher costs.

In general, if you pay a credit card off in full each month, you aren’t charged interest, but if you only pay off a small portion of the credit card balance, you’ll be charged interest on any monies outstanding – often at a high rate.

The same also applies to store cards, so if you have multiple credit cards, there’s a good chance you’ll be paying a high rate of interest on any borrowing you allow to roll over.

As a result, you may be able to save money by paying off credit or store card balances with a new loan, and potentially lowering your monthly repayments in the process and the rate of interest.

How do I consolidate credit card debt?

Credit card debt consolidation is straightforward:

  1. You work out how much you have outstanding across all your credit cards (you may have this information to hand; if not, contact your card providers)
  2. Use this overall figure as your loan amount, and look for a loan with an appropriate interest rate and term (the length of time over which you’ll make repayments)
  3. After you’ve chosen the best loan option and been approved, the loan will be paid to you – you then use this money to pay off your selected creditors
  4. You make a single, regular monthly payment on your new loan, paying it off over the agreed term

Ideally, a debt consolidation loan will have a lower interest rate than your credit card debt(s). However, If you have a poor credit score, you might find that you have fewer options available to you

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