At a Glance

Credit card refinancing and debt consolidation are similar enough that they often get confused with one another, but they are not the same. The main difference between credit card refinancing and debt consolidation is that “refinancing” is a term applied when seeking a lower interest rate on a single card, whereas “consolidation” involves batching multiple cards.

Both strategies can save you money, but which of them is better? That’s a question we’ll seek to answer in this article. The answer could very well be dictated by your individual situation, so we’ll try to be as expansive as possible in our explanation of what these terms mean. A good starting point for you would be to check the current interest rates on your credit cards.

What is credit card refinancing?

Refinancing is the process of using a balance transfer to pay off your credit card debt, leaving you with just one monthly payment to manage instead of multiple. You’re essentially moving your credit card balances from one card to another. But ideally, the balance transfer credit card you’re using to refinance credit card debt has a lower interest rate than your existing credit card debt, which can help save you money and allow you to pay off your debt faster.

Additionally, these cards typically have a 0% intro APR, where you do not accrue interest for a certain period. This can help you pay off your debt without accruing interest.

Read More: What Is Credit Card Refinancing?

What are the pros and cons of credit card refinancing?

Pros Cons
  • Pay off the balance without paying interest during the 0% intro APR period (typically 12-18 months)
  • 0% promotion doesn’t last long, and due to variable interest rates, you may have a much higher rate once the promo period is over
  • Access to additional revolving credit as you pay off the balance
  • Some cards have balance transfer fees
  • Application process is quick and easy
  • Penalty APRs if you make a late payment or go over your credit limit
  • Approval process happens quickly
  • Variable interest rates mean you could have higher interest rates in the future

What is credit card debt consolidation?

If you have multiple credit cards with debt, you can also consider credit card debt consolidation. This process involves taking out a personal loan to pay off all of your outstanding credit card debts, and then making payments toward the personal loan each month.

Like refinancing, the goal is to have a lower interest rate than your old debt, helping to save you money, and also makes repayment simpler by only having one payment.

Compare: Credit Card Debt Consolidation Loans

What are the pros and cons of credit card debt consolidation?

Pros Cons
  • Simply debt repayment with one monthly payment
  • Those who do not have good or excellent credit may not get a lower interest rate
  • Lower interest rates
  • Fees
  • Fixed monthly payments
  • Eligibility requirements differ by lender
  • Can help improve credit score
  • Longer repayment terms

Consolidate credit card debt or refinance using a balance transfer credit card: Which is better?


Balance transfers to lower interest credit cards are a good example of credit card refinancing. What you’re essentially doing is moving the outstanding balance on one card over to another card that offers a lower interest rate. Several credit card companies offer a limited time 0% interest rate on balance transfers for new customers.

Another way to do this is to take out a personal loan to refinance a credit card. The concept is the same as with a balance transfer. Your objective is to find a lower interest rate. As a bonus, a personal loan could also stretch out the amount of time you have to pay off the outstanding balance and lower your minimum monthly payments.

Debt consolidation

Refinancing is a great option when you only have one or two credit cards to worry about, but what happens when half a dozen of them are out of control? That’s a situation that calls for debt consolidation. To sum it up in simple terms, add up all the outstanding balances and apply for a consolidation loan to pay them off. There are several advantages to doing this.

First on the list is the interest rates. As stated above, the average interest rate for credit cards in the U.S. is 19.49%. According to Credit Karma, the average interest rate for a personal loan is 9.34%. That’s dependent upon credit score, but the loan option is still a significantly better deal if you want to save money on your credit card debt.

Another advantage to debt consolidation is that personal loans can be taken out with multiple-year payment terms. That lowers your monthly payments due and frees up extra cash to cover essential expenses or even splurge a little on yourself. Of course, you’ll need to stop using your credit cards to make this work. Paying them off is no good if you run up the balances again.

You can estimate how much you’ll pay for a debt consolidation loan using our Personal Loan Calculator.

Credit Card Refinancing vs. Debt Consolidation

Which of these is the better option for you? This is a finance question, not a credit repair strategy. The answer depends on your individual situation. If you only have one credit card, there’s nothing to consolidate. When your wallet is filled with plastic, consolidation might be a better option. If you’re uncertain, consider the following:

Category Credit Card Refinancing Credit Card Debt Consolidation
What it is
  • Transferring the balances of multiple credit cards to one that has a lower interest rate
  • Only have one monthly payment instead of multiple
  • Taking out a consolidation loan to pay off your credit card balances
  • Make monthly payment toward the loan
How to do it
  • Make a balance transfer, ideally to a 0% APR card
  • Apply for a personal loan, home equity loan, or home equity line of credit
  • 0% intro APR for a certain period of time
  • Quick application and approval
  • Lower APR than credit cards
  • Fixed monthly payments
  • Can help with credit score
  • High APR after the 0% period is over
  • Fees
  • Longer application and approval process
  • Typically need good to excellent credit
Who it is best for
  • Small credit card debts that can be paid off within two years
  • Those with excellent credit
  • People who need longer to repay debts

As you can see, there are pros and cons to either method. We’re not going to recommend one over the other. That’s up to you. Both can save you money and make your finances more manageable, but only if you understand the repayment terms and make the commitment to cut your spending. Do that and your credit card debt could become a thing of the past.

Should you choose debt consolidation or credit card refinancing?

In 2024, the average credit card interest rate in the U.S. is 22.63%. That doesn’t mean you’re paying 20% on all your credit card purchases. Some cards have lower rates, even 0% during certain introductory periods. But let’s put the low interest cards aside for now. You may not need to do anything with those, other than pay them on time of course.

If you have one or even two credit cards that carry a high interest rate, you may want to look into credit card refinancing. If you have a batch of cards in that category, you’ll want to explore other options. Break out the debt consolidation calculator and get ready.

Frequently Asked Questions

Is it better to refinance credit card debt?

Refinancing is a decision that should be based on the situation. If your credit card interest rate is high, it’s a good idea to refinance for a lower rate. That can be done by a balance transfer or by taking out a personal loan to cover the outstanding balance on the credit card.

Does refinancing affect your credit score?

Yes, refinancing can affect your credit score. A balance transfer to a new credit card adds a new account to your credit report and a personal loan will require a “hard inquiry” from the lender which will drop your score a few points.

Does consolidating debt ruin your credit?

No, consolidating debt does not ruin your credit, but you may see a drop in your credit score soon after you do it. The consolidation loan is a new account and payments to your credit card companies may not be reported right away. Expect your score to go down temporarily.

Read more: Does Debt Consolidation Hurt Your Credit Score?

Debt consolidation loans vs. balance transfer credit cards

When you refinance credit card debt, you are transferring the outstanding balances on one or more cards to a balance transfer credit card. Ideally, this card has a 0% intro APR which allows you to start paying off the debt without accruing interest. On the other hand, you can use a debt consolidation loan to repay all of your credit card debts, and then make your monthly payments toward paying off the loan.

What does it mean to refinance a personal loan?

When you refinance a personal loan, you take out a new personal loan to pay off the old one. You may want to consider this if you can get a lower interest rate or better terms for a new loan than your existing one. However, some lenders do have restrictions for refinancing personal loans, so check with your lender to learn more.

Can I use my credit card while refinancing?

Avoid opening a new credit card or closing an existing one while you are refinancing your credit card because this can affect your credit history and credit score. While you can use your credit card while refinancing, you should be cautious if doing so. Continuing to use the cards without getting debt under control can lead to additional debt.

What credit score do you need to take out a debt consolidation loan?

Credit score requirements vary by lender and lender type. For example, online lenders may cater to those with a lower credit score than banks or credit unions. Typically, lender minimums fall around 660 and above, though some may accept scores as low as 580. Keep in mind that the higher your credit score is, the better the interest rate you will qualify for.

Is credit card refinancing bad?

If you can qualify for a lower interest rate than you have with your old debt, it may be an effective way to pay off your credit card debt. Keep in mind that refinancing can temporarily decrease your credit score, but as you make monthly payments on time and in full, your credit score may increase.