5 Best Ways to Consolidate Credit Card Debt

Here’s a look at how to consolidate credit card debt.

The average credit card interest rate in late 2017 was 13.08 percent, according to the Board of Governors of the Federal Reserve System. At that rate, your credit card debt would double in less than six years. For people with bad credit, that rate could be even higher.

Even if you’ve got good credit and a high credit score, consider debt consolidation if you’re struggling with paying off debt. Technically, debt consolidation is simply the process of rolling multiple debts into one, but the true objective of a debt consolidation loan is to lower your overall interest rates and payments. Take a look at the best ways to consolidate credit card debt.

5 Credit Card Debt Consolidation Options

Each of the following options for credit card debt consolidation one has strengths and weaknesses — there is no “one size fits all” method that is the single best way to pay off credit cards. Consider your personal financial situation when reviewing the features and benefits of each of these ways to roll all your debt into a single bill payment.

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Here are five credit card debt consolidation options that you can consider when paying off credit cards:

1. Balance-Transfer Credit Cards

Balance-transfer credit cards are one of the easiest ways to consolidate credit card debt. Many cards offer 0 percent balance transfers for an extended period. The Citi Simplicity card, for example, offers a 21-month balance transfer period at 0 percent, and numerous other cards routinely offer low- or no-interest transfers for 12 to 18 months. The savings can be dramatic: An individual with $10,000 in credit card debt could accumulate an additional $1,300 or more in interest after just one year, versus $0 on a balance-transfer card. But when that promotional period ends, rates can jump up dramatically — to as high as 25.24 percent in the case of the Citi Simplicity card.


  • Interest savings
  • Additional features and benefits, such as extended warranties on purchases with some cards


  • Potentially high rates after the promotional period ends
  • Balance transfer fee of $5 or 3 percent, whichever is more

Check Out: 10 Best Balance-Transfer Credit Cards

2. Personal Loans

Using a personal loan to pay off credit cards can be a good option for consolidating debt, especially if you have a relationship with a bank and can qualify for a lower rate. Most banks offer unsecured, personal credit card loans to qualified borrowers, and this can be a good way to consolidate your outstanding debts into a single, bank-issued loan. Wells Fargo, for example, offers loans from $3,000 to $100,000, with no personal collateral required. Rates are fixed, unlike credit card interest rates which typically are variable and can go up in a rising-rate environment.

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  • Fixed interest rate
  • Lower rates than credit card rates
  • With some banks, no consolidation or loan origination fees


  • Rates might be higher than 0 percent credit card balance transfer offers

Related: Best Personal Loans for Debt Consolidation

3. Debt Management Plans

A debt management plan is not a loan but rather a financial arrangement you make with a credit counseling company. The company will negotiate with your creditors on your behalf to arrange a repayment plan that lowers your outstanding balance, your interest rate or both. Then you make a monthly payment to the credit counseling company for a specified term until the agreed-upon amount is paid off. Although this might sound like a panacea, entering a debt management plan can trigger negative credit ramifications.


  • Reduced payment amount or interest rates
  • One monthly payment for all your outstanding debts
  • A freeze on your accounts so creditors don’t pursue legal action against you


  • Damage to credit history
  • Damage to relationship with lenders
  • Payment of fees to credit counseling company

4. Home Equity Line of Credit

You can borrow against the equity in your home to pay off your credit card debt. Your new home equity loan will require just one monthly payment, and you’ll often be able to get a rate lower than the average credit card interest rate. In one sense, you’re borrowing from yourself if you take out a home equity line of credit, since you’re borrowing the equity in your own home. But you’ll still be dealing with a third-party lender, which leads to the main negative of a HELOC — you’re putting up your house as collateral. In the event you can’t pay back your loan, your home might face foreclosure.

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  • Lower rates than credit card interest rates


  • Might pay loan origination fees
  • Putting up house as collateral is dangerous if you can’t make the payments

Learn: How to Get a Home Equity Loan When You Have Bad Credit

5. Borrowing From a 401k

Individuals with a 401k plan can usually borrow up to half the value — to a maximum of $50,000 — for hardship purposes, which are defined by each individual plan sponsor. One of the key benefits of a 401k loan is that the money you repay — both principal and interest — goes directly back into your account. The interest rate you pay usually is low, and the loan doesn’t appear on your credit report. But you might forgo long-term gains in your retirement account by borrowing the money for a short-term problem. Failure to pay back the loan results in ordinary income tax and early withdrawal penalties on the full amount of your outstanding loan.


  • No lender — repay yourself
  • If loan is repaid, no early withdrawal penalty if younger than age 59.5
  • Lower interest rates than credit cards
  • No credit ramifications if you default
  • Terms of up to five years
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  • Default can trigger taxes and penalties
  • Loss of interest while money is out of the account
  • Must repay loan within 60 days of losing or changing jobs

Keep Reading: The Best Ways to Pay Off Every Kind of Debt

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About the Author

John Csiszar

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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