3 Signs You Should Consolidate Your Credit Card Debt

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If you're having trouble with credit card debt, consolidation could be the way out.

Since credit cards tend to have high interest rates, getting rid of credit card debt can be expensive. A popular way to pay it off more efficiently is debt consolidation.

Here are the two most common ways to consolidate credit card debt:

  • Apply for a balance transfer card. The best balance transfer cards offer an introductory 0% APR on balances you transfer over. These cards typically require a good credit score for approval.
  • Apply for a debt consolidation loan. This is a loan intended for paying off other debt. Although you can get a lower interest rate with good credit, there are debt consolidation loans for consumers in every credit score range.

Debt consolidation requires a full application process, and there are usually fees for both balance transfers and loans, so only do it if it helps your situation significantly. Here are the most common signs it's a good idea to consolidate your debt.

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1. You have trouble managing your credit card payments

When you have balances across multiple credit cards, managing payments can be tricky. You're more likely to forget a due date, miss a payment, and get charged a late fee. Or you might not have the money in your bank account to cover every payment.

Debt consolidation helps simplify things by cutting down on your payments. Once you've consolidated your credit card debt, you only have one monthly payment, which is much easier to keep track of.

If your credit card payments have become too much to handle, you may also pay less per month through debt consolidation. Loans are particularly good for this. You can request a longer loan to get a lower monthly payment amount. Keep in mind that a longer loan does mean more interest charges.

2. You have a high credit score

A high credit score can help you qualify for the best financial products. For paying off debt, that means balance transfer cards with the longest 0% APR offers, and debt consolidation loans with the lowest interest rates.

How high does your credit score need to be? Although there's no set number that guarantees approval, a FICO® Score of 670 is considered good. That's often enough to get a balance transfer card or a low-interest loan. There are plenty of ways to get your credit score for free if you don't know yours yet.

With a FICO® Score of 670 or higher, it makes sense to take advantage. Check out balance transfer cards or rate-shop for a loan.

3. It's going to take at least six months to pay off your debt

Debt consolidation is generally more beneficial with bigger debts that take longer to pay off. If you'll be paying for a year, two years, or longer, a lower interest rate can save you hundreds or thousands of dollars.

It's not as beneficial with small debts you could pay off in a few months. You could still get a balance transfer card and save on interest. However, these cards almost always charge a balance transfer fee of 3% to 5%. That fee can wipe out most or all of the interest savings.

Do the math on how long paying off your credit card debt will take. A credit card payoff calculator can help with that. Plug in your total balances, the interest rate, and the amount you can pay per month to see the payoff time.

A rule of thumb is to consider debt consolidation if you'd be making payments for at least six months. If you can pay it off sooner, debt consolidation probably isn't worth the hassle.

One last thing to know about debt consolidation: it doesn't fix credit card debt on its own. It only works if you pay as much as you can, and avoid overspending with your credit cards. If you do that, consolidating your debt can save you money.

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