Credit Card Debt Consolidation

By:    Updated: March 4,2017

Credit cards have easily become a leading supplier of debt in the United States. Whether young or old, consumers find many incentives in using credit cards, including convenience, availability and simplicity.

What Is Credit Card Debt Consolidation?

Credit card debt consolidation is the process of merging multiple credit card balances and consolidating them into a single monthly payment. In short, the debtor takes out one big loan to cover all other loans in order to lower payments and interest rates. This allows the debtor to ease their way out of debt slower and easier, and many creditors will cease collection calls and waive late fees and overage charges.

How It Works

There are multiple procedures for credit card debt consolidation, and each works slightly differently.

Credit card debt consolidation programs are run by third-party companies and can help you avoid paying higher interest on your credit card bills. A consultant will communicate directly with your creditors and/or collection agencies to reduce interest rates, waive late fees and find an affordable repayment plan. Instead of paying several creditors, you will make one lower monthly payment to your consolidation company.


Do-it-yourself credit card consolidation is considered "free" credit card consolidation and does not require a third-party organization. Rather, you as the debtor can transfer balances from your higher-interest cards to one with the lower interest rate. By doing this, you minimize interest payments and leave yourself with only one monthly payment. However, you should never close all your other credit cards at once -- this will negatively affect your credit score.


Paying off credit cards with a consolidation loan is very similar to regular debt consolidation. You take out a debt consolidation loan -- usually through a bank or other credit agency -- to pay off all your credit card bills. While these consolidation loans have the benefits of lower interest rates than personal loans, they typically lead to the debtor paying more money over time than their original balance. Also, not everyone qualifies for consolidation loans. This is determined by your credit score and history, or by your ability to put up collateral.


If you choose to take out a consolidation loan for your credit cards, then there are two options: unsecured consolidation loans and secured consolidation loans. The former typically has higher interest rates and requires a qualifying credit history, while the latter has lower interest rates due to the debtor's putting up collateral, such as their car or home.

So It's Time for Credit Card Consolidation

After weighing the costs and necessities of credit card debt consolidation, you may decide to do it. When proceeding with the process, always be on your toes. For processes involving third-party affiliate for your consolidation needs, you should always read the fine print in your contract or agreement. While fees are standard for consolidation services, some companies will sneak in extra charges, like monthly "account management" fees and sometimes even a lump percentage of your overall debt. To verify a company's legitimacy, always research its certification and consumer reviews. Also, consolidation companies are required to offer credit counseling services to their customers as an alternative to consolidation. In the end, make sure you are comfortable both with the service you're receiving and the amount you're paying for services. This process is all about making your life easier, not a company's.

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