What is credit card debt consolidation?
Americans have about $887 billion in credit card debt, a 13% increase from 2021, which is the largest year-over-year increase in more than 20 years. Rising interest rates, inflation, and other economic factors are leading to record-setting credit card debts in American households.
If you have multiple credit cards with debt, you may want to consider consolidating them. Whether through a credit card debt consolidation loan, balance transfer credit card, or other method, credit card debt consolidation lets you combine multiple high-interest credit card debts into a single payment with a fixed rate and term. Ideally, the new consolidation method has a lower interest rate than your outstanding debt, which can help you save money and pay off your debt faster.
Why consolidate your credit card debt?
Overall, the national average credit card debt among cardholders with unpaid balances was $6,569, though some consumers have much more. And, with more than 54% of all active credit card accounts having a balance, many Americans are facing the real struggles of debt.
There are a number of reasons why consolidating your credit card debt can be beneficial:
How should I consolidate my credit card debt?
When it comes to credit card debt consolidation, you have a variety of options. Here are some of the most effective ways to consolidate:
Get a balance transfer credit card
If you try to repay your debt quickly, you can take advantage of 0% intro APR offers, which can save you money on interest. Most balance transfer credit cards
will charge balance transfer fees, though.
Consolidate with a personal loan
Debt consolidation loans
from banks, credit unions, and online lenders come with fixed interest rates and set repayment terms, so paying off your debt can be predictable.
Use your home equity
Homeowners can get a home equity loan, home equity line of credit (HELOC), or cash-out refinance
to help pay off credit card debt. Since your home counts as collateral, interest rates are typically lower than personal loans, but you’ll have to pay closing costs.
Look into a debt management plan
Nonprofit credit counseling agencies can assess your debt and help build a debt management plan
, which has you make monthly payments to the agency, who pays creditors on your behalf.