The 3 Best Ways to Consolidate Credit Card Debt – And 2 Ways to Avoid It

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Are you carrying debt on more than one credit card? Consolidating that debt into one monthly payment could save you time — and more importantly — a lot of money.

There are a lot of companies out there that promise to help you consolidate credit card debt. In this article, I’ll show you how to do it yourself and avoid rip-off charges you might find with those companies.

We’ll also get some expert advice from money expert Clark Howard, who has been helping people get out of debt for more than 30 years.

Carrying Multiple Credit Card Balances? Here’s How to Consolidate Them

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If you’re paying interest on balances on two or more credit cards, you might be able to consolidate those balances into one loan at a lower interest rate.

That’s worth doing because, instead of multiple payments each month, you’d need to make just one. And if you find a better rate, that payment could be lower than the total amount you’re paying now.

First, Take Stock of Your Credit Card Debts

Before you start considering your options for credit card debt consolidation, you need to take stock of your situation.

The first step is to make sure you know exactly how much you owe and what your rates are. That means you’ll need to make a list of all of your outstanding credit cards debts and include:

  • Who the creditor is
  • How much money you owe
  • What the interest rate is
  • What the minimum payment is

You can do this on a piece of paper or in a spreadsheet like Excel or Google Sheets. The important thing is that you have all of the information in one place because you will need it in the next steps.

Your list of debts should look something like this:


Credit card consolidation spreadsheet

The next thing you want to do is figure out your average interest rate.

Step 1. Take the balance of each credit card and multiply it by the interest rate for that card. In the example above, it would look like this:

  • $10,000 X 12.90% = $1,290.00
  • $2,500 X 15.99% = $399.75
  • $4,200 X 21.99% = $923.58

Step 2. Add those numbers together:

$1,290.00 + $399.75 + $923.58 = $2,613.33

Step 3. Add the card balances together to get your total loan amount:

$10,000 + $2,500 + $4,200 = $16,700.00

Step 4. Divide the total from Step 2 by the total in Step 3:

$2,613.33 / $16,700.00 = 15.65%

In this case, 15.65% is the average interest rate. If you’re able to consolidate your debts at a rate that’s significantly lower than your average interest rate, you’ll save money on interest payments in the long run.


If you don’t want to do the math yourself, there are online calculators that will do it for you. Here is a good one.

Once you have a good sense of what your outstanding debts are and what your average interest rate is, you have some options when it comes to trying to consolidate those debts.

Option 1: Look Into Balance Transfer Offers

Many credit cards will offer you the opportunity to transfer balances from other cards onto that card at a promotional interest rate.

Most often, this will take the form of a limited-time balance transfer offer.

With a limited-time balance transfer offer, if you are approved you will pay a lower rate for a specific period of time. At the end of that specified period, any balance you have remaining will accrue interest at the standard rate for that card.

“There are many ways to get out of debt,” says U.S. News and World Report credit card expert and consumer finance analyst Beverly Harzog, “But if you still have good-to-excellent credit (a FICO score of at least 720 or so), a balance transfer credit card might be your get-out-of-debt ticket.”

If you have great credit, you might qualify for a balance transfer credit card that offers a 0% introductory interest rate. Right now, the best balance transfer cards have intro periods ranging from 12 months to 21 months.

But note that there’s a balance transfer fee of 3% to 5% with most credit cards. If you end up paying a fee, make sure you add that to the cost of repaying the debt.

For instance, if you transfer $5,000 to a card with a 3% transfer fee, you’ll owe an extra $150 (5,000 x .03 = 150), and that will bring the total amount you owe to $5,150.

In many cases, you’ll still come out ahead because what you save on interest more than makes up for the fee. But do run the calculations and make sure the card you’re considering is worth the transfer fee.

What if your credit score is less than ideal? There are balance transfer cards out there that might have a balance transfer APR that’s better than the average interest rate you’re paying now.


When you are considering balance transfer offers, it’s important to understand exactly what you’re getting yourself into when you apply. Comparing different offers can be challenging, but generally, you want to be looking at:

  • What the promotional interest rate will be
  • What the fee is for doing the balance transfer
  • How long the promotional interest rate lasts
  • What the interest rate is on balances after the promotion period ends

You want to make sure that the promotional interest rate plus the fees still total less than what you’d pay if you didn’t transfer the balance(s).

You’ll also want to ensure that the amount of time the promotional rate lasts gives you long enough to pay off your balance.

Learn more about paying off debt with a credit card balance transfer offer here.

Option 2: Consider a Debt Consolidation Loan

If your credit is good, you might be able to get a personal loan with a fixed APR that’s lower than the rates you’re paying on your accounts.

Here again, you also need to be aware of fees, so read the fine print carefully. For example, some lenders charge origination fees of anywhere from 1% to 6%.

Here are some of the more reputable companies that offer debt consolidation loans:

Interest rates for these loans currently range from around 5.5% to over 35%. You’ll need to have excellent credit to get a rate on the lower end of that scale.

Like a credit card balance transfer, a positive thing about a debt consolidation loan is that you’d have one just monthly payment to make.

But note that under the new FICO 10 credit scoring model, your credit score could take a hit if you take out one of these loans. This is especially true if you continue to rack up charges on your credit cards after you take out the loan.


Clark isn’t a huge fan of these loans.

“My attitude about debt consolidation loans is generally they’re just rearranging the deck chairs on the Titanic. You still sink. I don’t want you to sink.”

If a debt consolidation loan isn’t a good fit for you, there’s another Clark-approved option for consolidating your credit card debt.

Option 3: See a Certified Debt Counselor

If you’re really struggling with credit card debt, Clark says you should get in touch with a local affiliate of the National Foundation for Credit Counseling at

“They can advise you about budgeting, which will help about one in three people,” he notes. “Beyond simple budgeting, there are other techniques they may suggest based on your individual circumstances.”

One of the things the NFCC can help you with is setting up a voluntary agreement between you and your creditors. When you set up a Debt Management Plan with them, you make one lump sum payment to a nonprofit agency, which in turn pays your creditors.

Here’s how NFCC outlines the benefits of this program:

“By participating in this type of debt management program, you may benefit from reduced or waived finance charges or fees, and experience fewer collection calls. When you work with an NFCC agency on a debt management program, your accounts are credited with 100% of the amount you send in.”

Clark recommends seeing the NFCC to anyone who can’t get spending and debt under control.

There’s typically little or no fee involved in setting up a Debt Management Plan, and it won’t have any effect on your credit.

Two Things You Don’t Want to Do When Consolidating Credit Card Debt

Take Out a Home Equity Loan or Line of Credit

Never ever take money out of your home to pay off credit card debt. Credit card debt is unsecured debt.


If you don’t pay your credit card bill, there’s nothing a credit card company can do other than ruin your credit and/or harass you endlessly to pay your bills.

But mortgage debt is secured by your home. If you fail to keep up with your monthly mortgage payments, you could find yourself out on the street.

A home equity loan or line of credit only adds to the amount of money you owe on your house, making it more likely that you could default and go into foreclosure.

Finally, if another massive crash in housing values were to happen as it did in the 2000s, you could wind up “upside down” in your home — where you owe more than the home is worth.

Borrow From Your Retirement Funds

If you have a sizable amount of money built up in your retirement account at work, you might be tempted to borrow from your 401(k) to pay off your credit card debt.

It’s a question Clark gets all the time, and he feels very strongly about the answer:

“Almost 100% of the time people have asked me about borrowing from their 401(k), the answer is ‘No!’” Clark says. “That has to be the last option and something you do when you’re out of all other possibilities.”

“When people do borrow from a 401(k), historically it means that they end up with not near enough money to live on in retirement,” he says.

That’s scary, considering that according to a study from the Investment Company Institute, nearly one in five people who are eligible have a loan against their 401(k).

“Even a single loan from a 401(k) can throw you off-track because you lose so much time in saving for retirement and having to pay back that loan, which often reduces what you can contribute,” Clark says.

Avoid Adding Any More Debt

Finally, the one thing you don’t want to do when consolidating credit card debt is to continue to use those cards. A zero balance on a card is not a green light to start spending freely.


If you can’t commit to buying only things you can afford going forward, you’ll be on a fast path to ending up in even more debt than you’re already in.

Feeling stuck and not sure what to do? Contact our free Consumer Action Center.

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