Consolidating credit card debt

If you consolidate your credit card debt, you’re combining multiple credit card debts into one.

That means you only have to make just one monthly payment instead of several.

That can, in turn, help you avoid missed payments and late payment fees.

You might also be able to get a lower interest rate, depending on factors such as your credit score.

And your credit score could improve over time if you’re able to keep up with payments.

There are two ways to consolidate your credit card debt.

Personal loan

You can take out a personal loan to pay off all your credit cards, then repay the loan in fixed monthly instalments.

Balance transfer credit card

You can move multiple credit card balances onto one new card, possibly with a low or 0% interest for a set time - usually between six and 24 months.

Consolidating your credit card debt can have some advantages, such as making your debt easier to manage.

But there are important drawbacks that are important to remember.

For example, some options come with fees, such as balance transfer fees and loan set-up charges.

So you need to think about if it will actually save or cost you more money in the long run, and if you can afford the new repayments.

That’s particularly important if you’re thinking of moving all your debts onto one card, as once the introductory offers - such as 0% interest - expire, your repayments could go up sharply.

You might also not get the best deals if you have a poor credit score, and if the repayment period is longer, you could pay more overall, even with lower interest.

Another consideration is that credit card consolidation doesn’t write off your debt.

You still owe money, and if you miss payments, you could harm your credit score or face extra charges.

That’s why it’s really important to get specialist debt advice before making any decisions, as there could be other, more suitable options open to you.

If you’re trying to pay off your credit card debt, you’ll want to get into good financial habits and avoid getting into the same situation again.

Use your credit card carefully

Think about how you use your credit card to avoid running the risk of more debt.

For example, don’t get into the habit of using credit cards for everyday purchases like food, unless you’re in a position to pay it off in full, and try not to take out new credit or increase your card limits.

Keep on top of your payments

Set up direct debits so you automatically pay at least the minimum amount you owe each month.

Otherwise, you risk paying more in interest, fees and charges than on actually reducing what you owe.

If this lasts for 18 months or longer, you’re said to be in persistent debt.

Work out a household budget

Make sure you know exactly how much money you’ve got coming in and going out, so you can keep up with essential expenses, prioritise your spending and work out where you can make savings.

We’ve created a free budget planner to help you get started, as well as a handy guide to creating a budget.

Yes.

There are other, and possibly more suitable, debt solutions that can let you write off some or all of what you owe, such as:

• a debt relief order
• bankruptcy
• individual voluntary arrangements

Alternatively, a debt management plan - an informal agreement with your creditors to pay off your debts at a rate you can afford - could be a way to lower your monthly payments.

You might also be able to get breathing space, which offers you short-term relief (60 days) so you have time to get advice and find a longer-term solution.

Speak to us for practical, confidential debt advice so we can help you find the best way forwards.