Three Ways to Consolidate Your Credit Card Debt | CreditShout

Three Ways to Consolidate Your Credit Card Debt

By Kevin / August 15, 2011
3 ways to consolidate your credit card debts


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There are a number of ways to consolidate your credit card debt. This article will describe three popular and practical ways to consolidate credit card debt:

  • Using another credit card
  • Through a debt consolidation firm
  • Through a personal loan or a home equity loan

Using A Low or Zero Interest Credit Card to Consolidate Your Credit Card Debt

The easiest way to consolidate your credit card debt is to apply for a new credit card offering 0% interest on balance transfers for as long as possible. (A year or more is best). Make sure you list all your credit cards and the balances you want to transfer when you apply for the credit card. There is a greater likelihood you’ll be accepted and given a credit line slightly above what you want to transfer — the credit card companies want your business!

To calculate how much you’ll want to pay on the new credit card each month (which will be well over the minimum payment at 0% interest) divide your amount of debt by the number of months you’ll get 0% interest. That’s the ideal amount you want to pay each month. Can’t afford that amount? Pay what you can — but make sure it’s a steady amount each month so you’ll see your debt dropping drastically — and then shop around for another 0% balance transfer offer once the first is set to expire.

Once you’re accepted for the card and the balance transfers go through, you’ve successfully completed your credit card debt consolidation. Now, take all the cards with the 0 balances and put them in the freezer, tear them up, or lock them in a safe deposit box — whatever you have to do so you won’t be tempted to use the cards.


  • 0 % interest makes it easy to pay down your debt fast
  • Is not reported as a negative action on your credit report (opening a new account will temporarily cost you about 5 – 10 points on your FICO score)
  • You could earn cash back rewards with the right credit card, like a Discover More card


  • Temptation to charge up your older credit cards again
  • No fixed monthly payments means you have to be disciplined enough to make payments that will decrease your debt quickly
  • You might pay balance transfer fees

Using a Debt Consolidation Firm for Your Credit Card Debt Consolidation

Debt consolidation through a debt consolidation firm is one way to consolidate your credit card debt, but be careful! There are many companies out there who will take your money and never make a payment to the credit card companies. Others charge outrageous fees.

A reputable debt consolidation firm will:

  • offer credit counseling in addition to renegotiating your debt and negotiating loan terms
  • be a non-profit organization, so the fees (if any) will be reasonable
  • be recommended by the National Foundation for Credit Counseling

Your debt consolidation firm deals directly with your creditors and may negotiate to have some of your debt “forgiven.” This erases some of your debt – often up to 50 percent – before you even make a payment. Be careful, as some of this “forgiven debt” may be reported as taxable income, and you’ll have to pay taxes on it.

The debt consolidation firm negotiates terms for repayment of your debts. You make monthly payments to the debt consolidation firm at a lower interest rate than what you were paying on your credit cards. The debt consolidation agency then doles out payments to your creditors.


  • Fixed monthly payments mean your debt will disappear within a specific timeframe
  • Your debt consolidation firm can negotiate to have up to 50% of your debt forgiven
  • Works well if your credit is bad and you can’t get another credit card to transfer balances


  • Difficult to find a reputable firm
  • Some companies charge fees
  • Forgiven debt reported as taxable income
  • This form of debt consolidation has a negative effect on your credit score and credit history

Using a Personal Loan to Consolidate Your Credit Card Debt

If you haven’t ruined your credit but just have more debt than you would like, you can use a personal loan to consolidate your credit card debt. A few years ago, people commonly used home equity loans or home equity lines of credit (HELOCs) to consolidate their credit card debt. Today, with a lot of homeowners owing more than their home is worth, this may not be a viable option for many people. That’s why we’ll look at an unsecured personal loan as the third way to consolidate your credit card debt.

A personal loan is a fixed (not revolving) loan, where you make fixed monthly payments at a certain interest rate. After you apply for, and receive, the loan, you would pay off all your credit cards with cash from the loan. Then, you’ll have one monthly payment to make to the bank at a fixed interest rate and fixed payment.

Most personal loans are 3, 5 or 7 year loans, so you’ll see a specific end-date to your debt. You can learn more tips about taking out a personal loan in this article.

A Home Equity loan or Home Equity Line of Credit works in a similar way, except you would be using the value of your home as collateral to get the loan. A major benefit to a home equity loan is that if you have excellent credit, you can qualify for a very low interest rate today. The downside is that won’t receive more than the amount of “equity” you have in your home. (Your down payment, plus the amount of principal you’ve paid toward your mortgage — providing you don’t owe more than your home is currently worth.)


  • Fixed monthly payments mean there’s a definitive end to your debt
  • No negative effects on your credit report


  • Temptation to charge up your credit cards again, leaving you with more debt than before
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