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What to Know About Credit Card Consolidation

Jul. 20, 2022 Blogging for Change

But if you start losing track of the different balances and what you owe, the monthly payments can feel overwhelming. 

Credit card consolidation brings multiple credit card debts together into a single debt, and therefore a single monthly payment. It can make monthly bills easier to manage and offer you peace of mind. But is consolidating your credit cards really worth it? That depends on a few factors. 


Broadly speaking, consolidating can be helpful when it achieves the following for you: 

  • Reduces the number of payments you need to manage
  • Reduces your interest charges
  • Creates a faster timeline to becoming debt-free

The downside? Consolidating credit card debt doesn’t do you any good if you’re simply kicking the can down the road. In other words, if consolidating doesn’t help you pay down your debt, moving it around doesn’t gain you any benefit. 

In fact, consolidation could make your debt situation worse if your old credit cards remain open and you’re still struggling with the original issues that got you into debt in the first place. You might end up charging to your old cards while you’re also paying off a consolidation loan, taking on even more debt than you had before you consolidated. 

So, if you do decide to consolidate, make sure you understand the terms of the new payment and the interest rate, and be sure to make a plan for paying off your debt. 



You can consolidate multiple credit card debts into an unsecured loan. This process involves shopping for a personal loan and weighing the available options. You may want to begin by checking with your bank or credit union to find out what terms they offer. 

When you apply for a debt consolidation loan you’ll need to fill out some paperwork, provide evidence of your financial situation, and submit to a credit check. A poor credit score may make it difficult to land a consolidation loan with the kind of terms that will make debt repayment easier for you. If you’ve already begun missing payments, you may have hard time qualifying for many consolidation loans.

If you’re approved, the loan is used to pay off all your outstanding credit card balances, setting them back to zero. The lender may or may not require you to close the other credit cards. Then you start making payments on the loan. 


With this method, you transfer all your card balances to a new credit card, somewhat similar to a debt consolidation loan. You find an appropriate card with favorable terms, such as 0% introductory APR for 12-18 months, apply, and hope to be approved. As with a consolidation loan, the better your credit score, the more likely it is that you’ll be approved. 

If you’re approved, you then use the new card to pay off the balance on your other cards, effectively transferring those balances to the new card and then making payments on that one card. 

This method can help you get ahead if it comes with a 0% interest rate, but keep in mind it will bounce back to a regular APR once the introductory rate is over. Many promotional rates may also expire immediately in the event that you miss a payment. 


A debt management plan (DMP) includes some of the better attributes of a consolidation loan (single monthly payment, reduced interest rates), but isn’t a loan and doesn’t require strong credit to qualify.

To begin a DMP you connect with a nonprofit financial counseling agency to review your finances and ensure that a DMP is a good fit. At MMI, you can complete this process entirely online. If the DMP makes sense for you, you’ll begin your plan by making payments to the agency handling your DMP, who will in turn make payments to your creditors. Your creditor accounts are closed as part of the process, and most creditors offer significantly reduced interest rates for participating on a DMP, which is why most plans are paid off in less than four years. You can also cancel your DMP at any time, which makes it a slightly less risky option.


How debt consolidation impacts your credit score depends entirely on the method you choose. Taking out a consolidation loan may temporarily lower your credit score due to the credit inquiry and the fact that the average age of your accounts will go down. (Older accounts are better for a good credit score, and your consolidation loan is brand new.) 

Closing old accounts usually hurts your credit score temporarily, so any method that involves closing accounts can ding your credit, at least in the short term. Keep in mind, if debt consolidation helps you make on-time payments and successfully reduce your debt, the benefits can soon outweigh the hit to your credit score and your score should recover quickly.

Debt consolidation isn’t a magic bullet. It can be a very helpful tool if you’re committed to reducing your debt, but to make it work, you need to have a plan and timeline in place to guide you out of debt.

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