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5 Strategies for Consolidating Credit Card Debt

Credit cards can bury you in debt. There are ways to take control.

Sarah Tew/CNET

Credit card debt remains a slow-motion disaster for millions of Americans. Halfway through 2022, Americans held nearly $900 billion in credit card debt, with an estimated 3.35% of that in the “major delinquency” category, according to the Federal Reserve Bank of New York. And, given the credit card industry’s sky-high interest rates, once you fall behind on payments, it can be difficult to catch up.

If you feel like your efforts to pay down your credit card debt aren’t working, debt consolidation can combine all of your credit card balances into one monthly payment, ideally with a lower interest rate. There are a number of consolidation strategies worth exploring and we’ll run you through each to help you identify which is best for you.

What is credit card debt consolidation?

Credit card debt consolidation is the process of transferring multiple credit card balances into a single loan. This can help you save money on interest and pay off your debt faster. The idea is to roll your total balance into a single monthly payment, at a lower interest rate. This can simplify your debt repayments and potentially save you money on interest charges. 

But it’s important to understand the risks involved before taking out a consolidation loan. For instance, if you miss a monthly loan payment, your lender will likely hit you with a late payment fee. Also keep in mind other up-front costs like loan origination fees, annual fees and closing costs. Lastly, debt consolidation doesn’t make the actual debt disappear. Whether or not you are making three monthly payments or just one, the debt is still tied to you until it is paid off.

Strategies for consolidating credit card debt 

1. Balance transfer card

Best for those with high credit scores who can repay their debt within 1 to 2 years

balance transfer credit card consolidates your existing credit card debt onto one card with one main benefit -- a low introductory interest rate. Most will offer a 0% introductory APR on balance transfers for between 12 to 24 months, allowing you a longer timeline to pay down your debt without worrying about interest. Balance transfer cards often charge a fee for each balanced transferred -- typically between 3% to 5% -- which can really add up when transferring large balances.


  • Lock in 0% or low introductory APR for a year or more

  • Some cards offer long introductory periods, up to 24 months


  • Most cards with low or no intro APR charge balance transfer fees between 3% to 5%

  • Can lead to more debt at a higher APR if the balance is not paid off during the promotional period

  • Typically requires great or excellent credit to qualify for 0% APR

2. Debt consolidation loan

Best for anyone with high debt balances

A debt consolidation loan is an unsecured personal loan that offers a fixed interest rate lower than most credit card APRs and repayment terms spread out over several years. This type of loan may be a better option for those who can’t qualify for a balance transfer credit card with a 0% introductory APR. You can even prequalify for a debt consolidation loan without affecting your credit score, so you can decide if this debt consolidation method is right for you.

Credit unions, banks and online lenders usually offer debt consolidation loans -- credit union debt consolidation loans typically have better interest rates and more flexible loan terms than other lenders. Shopping around for debt consolidation loans can help you find the right terms for your personal debt situation.


  • Fixed repayment schedule

  • Longer period to pay off debt

  • May be able to prequalify without affecting credit score

  • Lower interest rate than most credit cards

  • Can secure a debt consolidation loan with less than perfect credit


  • Must meet individual lender requirements to qualify

  • Some debt consolidation loans charge an origination fee

  • Interest rates are based on your credit score

3. Home equity loan, home equity line of credit (HELOC) or refinance

Best for homeowners with fair to average credit

Homeowners can use a home equity loan, home equity line of credit or refinance to consolidate their debt. A home equity loan is a second mortgage taken against the equity you’ve accrued in your home that provides a lump sum of cash with a fixed interest rate. A home equity line of credit, or HELOC, is also based on your home’s equity but works more like a credit card, offering you a revolving credit line you can access when needed. You’ll only pay back the amount you take out, plus interest, with a HELOC. And, if you have enough equity in your home, you can use a cash-out refinance to roll your credit card debt into a significantly lower interest rate.

A home equity loan or HELOC can help with debt consolidation, but the risks are higher -- if you default on either, you could lose your home to the lender. That said, this can be a good option for homeowners with equity in their home that have the discipline to pay off the loan responsibly, without missing a payment.


  • Typically lower interest rates than a personal loan

  • May qualify for better terms even without good credit

  • Lower monthly payments extended over a longer repayment period


  • Must have equity in your home to qualify

  • May require additional fees like an appraisal or closing fees

  • Could lose your home if you default on the loan or line of credit

4. Credit counseling/debt consolidation programs

Best for anyone who doesn’t qualify for most debt consolidation options

Credit counseling services can help you understand your finances and how you got into credit card debt in the first place. They also help you create a plan to pay off your debts, which may include a debt consolidation program. There are various nonprofit credit counseling services, which offer their services for free or a small fee. Credit counselors can also help you negotiate lower interest rates and fees.

With a debt consolidation program, you pay one fixed monthly fee that’s divided and sent to your creditors. A debt consolidation program does not affect your credit score and may be ideal for someone who can’t qualify for other consolidation methods. There are many credit counseling scams online, so be sure to thoroughly vet a company before paying any money. The FTC has a good checklist to follow when interviewing credit counseling services. 


  • Won’t negatively impact your credit score

  • Can reduce interest rates and fees

  • Fixed monthly payments

  • Available to those with less than favorable credit


  • May require service and monthly fees unless working with a nonprofit organization

  • Could takes years to pay off debt

  • Credit usage may be frozen while in debt management

5. 401(k) loan

Best as a last resort

If you have an employer-sponsored retirement plan like a 401(k), you may be able to take a loan against as much as 50% of your balance to pay down existing debt. There is no credit check involved, and interest rates can be lower than other debt consolidation methods. A 401(k) loan usually has a five-year repayment schedule, but the total loan amount plus interest will become due if you lose or quit your job.

While taxes are not owed on a 401(k) loan that’s repaid, if you can’t repay the loan, it can then be considered taxable income, and you’ll be required to pay taxes and early withdrawal penalty fees. 


  • Lower interest rates

  • No effect on credit score

  • Five-year, fixed repayment schedule


  • May reduce your retirement income

  • Subject to taxes and penalties if you can’t repay

  • Becomes due in full if separated from the employer

  • Has caps on the amount you can borrow

Should I consolidate my credit card debt?

The decision to consolidate your credit card debt depends on your individual situation. If you’re paying off several credit cards with high interest rates, consolidating the debt may be a good idea, especially if you’re able to get a low interest rate and have a good credit score. But debt consolidation isn’t a silver bullet and if you consolidate at a high interest rate, you may end up paying more in the end.

If you’re considering consolidation, make sure to do your research. Understand the risks involved and any fees associated with different types of loans. And determine whether consolidating is the best option for your specific circumstances.

How will consolidating my credit card debt affect my credit?

When you apply for a balance-transfer card or a personal loan, the lender or credit card issuer will run a hard pull on your credit score. This can potentially hurt your credit score, though usually only temporarily. 

A consolidation can potentially lower your credit utilization, which is the amount of credit you’re using compared to your total available credit. The lower your credit utilization, the better your credit score. And if you make consistent, on-time loan payments, lenders may view you as a responsible borrower. 

Consolidating your debt can help pay off your debt though it may have some short-term negative effects on your credit score. But the upside of becoming debt-free may be enough to outweigh the costs.

First published on Aug. 12, 2021 at 4:00 a.m. PT.

Mandy Sleight is a freelance writer and has been an insurance agent since 2005. She creates informative, engaging, and easy-to-understand content on the topics of insurance, personal finance, sustainability, and health and wellness. Her work has been featured in Kiplinger, MoneyGeek and other major publications.
Liliana Hall is an editor for CNET Money covering banking, credit cards and mortgages. Previously, she wrote about personal credit for Bankrate and She is passionate about providing accessible content to enhance financial literacy. She graduated from the University of Texas at Austin with a bachelor's degree in journalism, and has worked in the newsrooms of KUT and the Austin Chronicle. When not working, she is probably paddle boarding, hopping on a flight or reading for her book club.