When Should You Consolidate Credit Card Debt?

The Reality of Using Credit Cards

Between card designs, rewards programs, and one-step purchasing, it can be easy to become credit card complacent, so comfortable swiping for everything that you start to overlook the fact that credit cards are a form of debt. Every time you use your credit card, you borrow the money for each purchase from the issuing bank — and you are responsible for paying that money back.

And if you can’t pay that money before the end of the billing cycle, the bank can — and, unless you have a 0% APR offer active on your card, will — charge you interest fees for every day you continue to borrow that money. With credit card interest rates often nearing 20% or more, particularly for those struggling to build credit, those fees can add up quickly.

Ways to Avoid Interest or Lower It

For those whose credit is still in good shape, the first step may be to transfer high-interest credit card balances to a card with a 0% interest balance transfer offer. These promotional offers provide a 0% APR on transferred balances for the length of the promotional period, which can be 12 months or more with the top offers. This can help you pay off your debt more quickly, but be sure to pay off your balance during the promotional period to avoid interest charges when your offer expires.

If your credit scores don’t qualify you for a credit card with a 0% interest offer, the next step may be credit card consolidation, or the process of using a single loan to pay off multiple credit card debts. Since most loans will offer lower interest rates than the typical credit card, consolidation can both simplify your repayment by reducing the number of bills you need to track, as well as decreasing the amount you need to pay each month thanks to lower interest charges.

Since the overall goal of consolidation is a lower interest rate, obtaining a loan for credit card debt consolidation with bad credit may require shopping around for multiple quotes to find a rate lower than your credit cards currently charge. Online lending networks are often a good place to get multiple quotes at once without a lot of back and forth.

Need Professional Help?

In the case that you can’t find a consolidation loan with a lower interest rate, you may need to consider options outside of consolidation to deal with your credit card debt. At this stage, your best move will likely be to contact a certified credit counselor or another reputable financial advisor. You can find nonprofit organizations, such as the NFCC, that can connect you with qualified counselors who have the training and experience to help you build a personalized plan to get back on track.

No matter how you choose to deal with your credit card debt, the most important thing to do is ensure you always make at least your minimum required payments each month, and that you make them on time. While high balances can be damaging to your credit score, that impact will pale in comparison to the credit score havoc that late payments can wreak. Worse, many credit cards will charge a higher penalty APR if you make late payments, which can only exacerbate an already strenuous situation.
The best thing you can do for your credit — and your personal stress levels — is to seek out help before you have a serious problem; it is significantly easier to prevent credit damage than it is to fix credit damage. You don’t need to wait until you are in over your head to contact a credit and debt counselor, with a little preventative counseling and the right financial tools, you may be able to pay down your credit card debt and build your credit score, all at the same time.

Byline: Ashley Dull is the Finance Editor at Digital Brands, Inc., where she oversees content published on CardRates.com and BadCredit.org. Ashley works closely with experts and industry leaders in every sector of finance to develop authoritative guides, news and advice articles with regards to audience interest. 
*Views expressed are the personal views of the author, and do not necessarily represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.