Our guide to consolidating debt with a credit card
Using a balance transfer credit card is a popular way to consolidate debt to make it easier and cheaper to pay off. Our guide explains how it works
What is credit card debt consolidation?
Credit card debt consolidation is when you bring your existing debts onto one credit card. It can help simplify your repayments and make your debts more manageable by giving you the flexibility of being able to choose how much to pay back each month, often at a low interest rate or 0% interest for a fixed time.
What to consider before deciding to consolidate your debts?
Can I pay off the debt already?
Check whether you need to take out another credit card to pay off your debt. If you have cash in savings or a current account that will cover what you owe, this is likely to be the best course of action.
Is my credit rating the best it can be?
Having an excellent credit score will mean you are offered the best deals (the longest 0% period for example) on a balance transfer credit card saving you money when it comes to consolidating your debt. Check your credit rating to ensure there are no mistakes and see if there are ways you can boost your rating.
Picking the right balance transfer credit card
If you are going to consolidate your debts onto a new balance transfer, you need to choose the right card. Here are some things to consider:
The interest rate needs to be less than you are paying on existing debts – ideally a low interest rate or 0% interest deal
The introductory period should be long enough for you to clear what you owe
There is likely to be a one-off transfer fee for moving the balance
What if I can’t consolidate all my debt onto a credit card?
Make it a priority to pay off the debt with the highest interest rate first (this is your most expensive debt). This will help you save the most in overall interest repayments.
What if I can’t pay off the debt before the introductory period ends?
If you don’t think you’ll be able to clear the debt before the low interest or 0% introductory period ends on a balance transfer card and the interest rate rises, it is important to think about what you will do next.
For example, you could move the remaining debt balance to another balance transfer card deal – if your credit rating and the new card provider allows this.
Our credit card calculator is a helpful tool which works out how long it’ll take to pay off your balance based on your current repayments.
What are the pros and cons of balance transfer cards?
There are a number of pros and cons to consider with balance transfer cards:
All your debts are in one place
Debt is more manageable with one payment per month
You could pay less interest overall
Your credit rating could improve if you can meet all repayments
There could be a one-off transfer fee to move the debt to a balance transfer card
You face a high interest rate after the low or 0% introductory period ends (take steps to switch your debt again if you can)
Penalty charges could be applied and you could lose the 0% offer if you miss repayments
Interest rates could be high if you use the card for new spending
Are balance transfer cards the only way to consolidate debt?
No, a balance transfer card is not your only option to consolidate debt. You could look to take out a personal loan, for example. It works in a similar way, allowing you to use the money borrowed to pay off your other debts – and then pay the consolidation loan off over time at a lower interest rate.
Even if it doesn’t reduce the amount you pay in overall interest, by spreading the payments over a longer period it could make them more manageable and means you are less likely to incur charges through missed or late payments. Compare interest rates and fees before making a final decision.
How will debt consolidation affect my credit score?
Consolidating your debt with a balance transfer card could have a positive impact on your credit score if it means you don’t make late payments or miss them altogether.
Credit reference agencies want to see that your money is being managed responsibly so even if you are in debt, showing that you are paying it off on time every month is helpful for your credit rating.
Compare balance transfer cards with MoneySuperMarket
Comparing balance transfer credit cards is quick and easy with us. Just tell us a few details about you and your finances and we’ll search for cards that suit your needs.
We use a soft credit search – so you can search and compare credit cards with no impact on your credit score.
You’ll be able to compare the length of the 0% interest-free period and any fees for transfers on different card deals. We’ll also show you your chances of being accepted for each card – so you can apply with greater confidence
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this service. Instead we are usually paid a fee by the lenders, but the size of that payment doesn’t affect how we show products to customers.