Consolidating multiple credit cards

Why are several credit card balances a problem?

Credit cards are easy to accumulate. Over time many people end up with two, three or more, each carrying its own balance, interest rate, minimum payment and statement date. Keeping track becomes harder, and because card interest is often charged at a relatively high rate, paying only the minimum on each can mean the balances barely move. Consolidating brings them together, so that instead of several payments you deal with one.

There are two main ways to do this, and they work quite differently. Understanding both, and the full cost of each, is the key to deciding whether consolidating your cards is worthwhile. Our broader page on credit card debt consolidation gives the wider context, and the guide to reducing credit card debt covers approaches that involve no new borrowing at all.

A loan or a balance transfer: the two main routes

Which route suits you depends on how much you owe, how quickly you can realistically repay, and the terms available to you. Our guide comparing debt consolidation versus a balance transfer sets out the differences in detail, so you can match the route to your situation. Whichever you consider, approval and any promotional rate depend on the lender's assessment and are never guaranteed.

The pros and cons of consolidating cards

Does a lower monthly payment really cost less?

A lower monthly payment is not the same as a cheaper debt. If you consolidate several cards into a loan with a long term, the monthly figure can fall noticeably while the total amount you repay rises, because you are paying interest over more years. The same applies to a balance transfer you cannot clear before the promotional period ends, when the rate, and the cost, can climb.

The reliable comparison is always the total cost over the life of the arrangement, set against what you would pay by keeping the cards and clearing them as quickly as you can. The debt consolidation calculator lets you add up your card balances and compare them with a single loan, and our page on the pros and cons of debt consolidation explores these trade-offs further. All figures produced are illustrative examples.

What discipline does it take to make consolidation work?

Consolidating credit cards only helps in the long run if the habit that created the balances changes too. The most common pitfall is clearing the cards and then gradually running them back up, so that you end up with the consolidation loan and fresh card debt on top. Avoiding that takes a plan and some discipline:

• Treat the cleared cards as a last resort, not spare spending power
• Consider whether to close some accounts, mindful of the effect on your credit file
• Build a budget so day-to-day spending does not rely on cards
• Keep a small emergency buffer so a surprise cost does not go on a card

Questions to answer before you combine your cards

Before you move several card balances into one place, it is worth being honest with yourself about a handful of practical questions. The answers often make the right route clearer than any comparison of rates:

• How much do you owe across all the cards, and at what rates?
• Could you realistically clear the total within a short period by paying more than the minimum?
• If you used a balance transfer, could you repay the balance before any promotional period ends?
• What has driven the balances up, one-off costs or spending that outpaces income?
• Would you be disciplined enough to leave the cleared cards alone?

If the balances grew because spending regularly exceeds income, consolidation on its own is unlikely to solve the problem, and it may be worth addressing the budget first or seeking advice. If the issue is genuinely that several high-interest balances are awkward to manage and expensive to carry, consolidating onto cheaper terms, and keeping up the payments, can be a sensible step.

This is an independent, educational website, not a lender, broker or adviser. Any figures on the site are illustrative examples only.