Should I Consolidate My Credit Card Debt? Here’s How to Know
Updated May 5, 2025
By Michelle Lambright Black
If high-interest credit card debt is eating away at your income and your peace of mind, you’re not alone. The average credit card balance reached $6,730 in Q3 2024 according to Experian data (among consumers who carried a credit card balance).1 One potential path to financial relief and better credit scores is debt consolidation.
Of course, it’s important to evaluate the benefits and drawbacks of this financial strategy before you decide if it’s right for you. The guide below breaks down how debt consolidation works and how it could impact your credit.
Here’s what you need to know.
What Is Credit Card Debt Consolidation?
Debt consolidation is the process of rolling multiple credit card balances into a single, new loan—usually with a lower interest rate. The goals of a taking out a debt consolidation loan include simplifying debt payments, potentially lower monthly costs, reducing overall interest costs, and getting out of debt faster.
Most people consolidate credit card debt using a personal loan, a balance transfer credit card, or even a home equity loan (though the latter comes with more risk). The right option for you depends on your credit profile, total debt, and how quickly you can realistically pay it off.
Is Debt Consolidation Right for You?
Deciding if debt consolidation is right for you is a multi-step process. Below are some ways you can assess whether this financial tool makes sense for your situation.
1. Understand Your Debt
Before you can decide whether to consolidate, you need a clear picture of what you owe. Make a list of each credit card balance, minimum payment, and interest rate.
For example:
- Debt #1 – $5,000 at 25.99% APR
- Debt #2 – $3,500 at 22.99% APR
- Debt #3 – $2,800 at 19.99% APR
- Debt #4 – $1,200 at 21.49% APR
Once you see the full picture, it’s easier to figure out if consolidation has the potential to save you money or if there’s a better way to tackle your debt.
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2. Review Your Credit
To qualify for debt consolidation financing—especially a loan or credit card with a competitive interest rate—you typically need at least a good or excellent credit score. Lenders reserve their best financing offers for borrowers with excellent credit. So, it’s important to know where your credit stands before you start applying for new consolidation loans or balance transfer credit cards.
Understanding Credit: FICO® Scores range from 300-850. In general, if you have a FICO Score of 670 or higher a lender may consider you to have a good credit score.
On top of your credit score, it’s also a good idea to review all three of your credit reports from Equifax, TransUnion, and Experian. When you apply for new credit, a lender or credit card issuer will check at least one of your credit reports (but you probably won’t know which one in advance). So, it’s wise to make sure the information on all three of your credit reports is accurate and in good shape prior to any new credit applications. If you discover errors on your credit reports, the Fair Credit Reporting Act (FCRA) empowers you to dispute those mistakes with each of the major credit bureaus.
If you find that your credit needs some improvement, debt consolidation might not make sense for you—at least not right away. Although debt consolidation offers for bad credit do exist, they often feature high interest rates and fees which may not have the ability to save you much money compared to what you’re paying on your current credit card accounts.
3. Get Real About Your Budget
Next, take an honest look at your monthly income and expenses. From there, calculate how much extra money you can realistically pay toward your debt each month. Budgeting tools and apps can help you with this exercise. Or you can go old school and work out these calculations with pen and paper.
Next, make sure you stop adding to the problem. If you’re serious about becoming debt-free, it’s important to pause new credit card spending for now. (Just don’t close your cards—doing so can hurt your credit scores by reducing your available credit and lowering your credit utilization ratio.)
4. Try the Debt Snowball or Avalanche Method
Whether or not you decide to consolidate, you can start reducing your debt balances with DIY strategies like the following.
- Debt Snowball: Start paying all the extra money you can toward the card with the smallest balance first. At the same time, keeping making minimum payments on the rest of your debt. Once you pay off the account with the smallest balance, roll that payment into the account with the next smallest balance. Repeat.
- Debt Avalanche: Begin paying down the credit card with the highest interest rate first (while making minimum payments on the rest of your debt.) After you pay off that account, roll that payment into the account with the next highest interest rate. Repeat.
These debt reduction methods can be highly effective if you’re motivated, can stick to a budget, and avoid creating new debt.
5. Consider Debt Consolidation—But Only If It Makes Sense
If you run the numbers and it looks like it will take years to dig out of debt, consolidation might be a smart solution. Here’s why:
✅ Debt Consolidation Could Improve Your Credit Scores
Credit scoring models like FICO and VantageScore treat revolving debt (like credit cards) differently from installment loans (like personal loans). High credit card balances can drag down your scores, while installment loans typically carry less weight—especially if you make on-time payments.
By consolidating credit card debt, you might lower your utilization ratio and boost your credit scores over time.
✅ You Could Save Money on Interest
Personal loan interest rates are often lower than the rates you’ll pay on credit cards—especially if you have good credit. Lower rates mean more of your payment goes toward the balance instead of interest, helping you get out of debt faster.
Related: Where Do Credit Scores Come From?
6. Protect Your Progress
Debt consolidation can be effective, but it’s not a cure all. To make sure a balance transfer credit card or a debt consolidation loan works in your favor:
- Avoid new credit card debt. This is the golden rule of debt consolidation. Use your cards sparingly, and only if you can pay the balance in full each month. You might even consider locking them in a safe or freezing them in a block of ice. (Yes, really.)
- Aim to pay the loan off early. There’s no penalty for making extra payments on most personal loans. And more than the minimum payment toward your credit cards—balance transfer offer or otherwise—is just smart. Even small additional payments can shave months and sometimes years off your repayment timeline.
- Stay organized. Automate payments so you never miss a due date. It’s also a good idea to check your credit reports regularly to make sure your account information remains accurate.
When to Skip Consolidation
Debt consolidation isn’t a perfect fit for everyone. You might want to hold off if:
- Your credit score isn’t high enough to qualify for a better interest rate.
- You’re likely to overspend on credit cards after consolidating.
- The fees on a new loan or balance transfer card cancel out potential savings.
- You’re already struggling to make monthly payments (in which case, a hardship program, bankruptcy attorney, or credit counselor might be a better first step).
Bottom Line
Debt consolidation can be a powerful way to reduce debt, improving credit scores, and regain control of your finances. But consolidation loans, HELOCs, and balance transfers aren’t perfect solutions for every situation.
Before you consolidate, take a step back, crunch the numbers, and think through your long-term goals. With a clear plan and consistent action, becoming debt-free isn’t just a dream—it’s entirely possible.
Michelle Lambright Black is a nationally recognized credit expert and freelance writer with over 20 years of experience covering credit, personal finance, and travel. She specializes in helping families and small businesses make confident, informed decisions about their purchases and financial lives.
Michelle’s work has been featured in top-tier outlets including Reader’s Digest, Parents, Experian, FICO, Forbes, Money, Bankrate, Seattle Times, MarketWatch, BuySide from Wall Street Journal, USA Today, and more. A three-time finalist for the Plutus Foundation’s Best Personal Finance Freelancer award, she’s known for breaking down complex credit and finance topics into clear, actionable advice.
When she’s not writing or speaking about money, you’ll find her exploring new travel destinations with her family or getting lost in a good book.
Sources
1. Experian.com. “Average Credit Card Debt Increases 3.5% to $6,730 in 2024.” https://www.experian.com/blogs/ask-experian/state-of-credit-cards/#:~:text=Quick%20Answer,the%20start%20of%20the%20pandemic.
One Comment
We got into some bad credit card debt 2 years ago and are pulling outselves out. Thanks for the tips and articles..they are more than helpful!