Is It a Good Idea to Consolidate Credit Card Debt?

How to Manage When You’re Drowning in Debt

Overwhelming debt is linked to a whole host of emotional difficulties. A 2017 study looked specifically at the long term effects of financial struggle and found it caused increased depression over time, was linked to worsening anxiety and even alcohol dependence.

For some, the burden of debt is so great it feels as if there is no way out. Credit card consolidation allows borrowers to turn multiple monthly payments into a single one, which might bring needed relief. Not everyone who chooses consolidation ends up ahead financially, so here’s how to decide if it’s the right choice.

How Does Credit Card Debt Consolidation Work?

There are two ways to tackle credit card debt through consolidation. First, borrowers can apply for a formal consolidation program and pay off all existing cards with a personal loan. Another option is to apply for a low or zero-interest credit card and transfer balances from higher-interest cards.

The hope is that grouping all debt onto one card or loan will create a smaller monthly payment and less interest paid. This is accomplished with a lower interest rate and sometimes negotiation of debts in collection.

When Credit Card Consolidation Is the Right Choice

Smart consolidation of debt results in spending less on interest and a faster pay-off time. This is a good choice if it means that monthly payments will be more manageable within a person’s existing budget.

If there’s a clear plan for paying off the new loan on time or the credit card before the low-interest introductory rate is over, this might be a good plan for quickly getting out of debt.

When Credit Card Consolidation Is a Bad Idea

Do the math; if consolidating credit card debt won’t end with you ahead, it isn’t a good idea. If you’re in debt because of reckless spending habits, paying off debt with another credit card or a personal loan may result in even higher balances if you end up returning to your old ways.

Additionally, if the monthly payment of the credit card consolidation loan or transfer isn’t manageable, don’t do it! Being unable to make minimum payments could result in an increased interest rate or the stress of debt being sent to collection.

Your mental health shouldn’t suffer because of the state of your finances. If you feel hopeless about the future or are engaging in unhealthy behaviors to cope with stress, reach out for free financial advice or the National Substance Abuse and Mental Health Hotline for support as you move forward.

~ Here’s to Your Financial Health!