How to consolidate your credit card debt, so it isn't making you poor af


You know you have too much credit card debt when the arrival of bills cause a physical reaction: a warming in your face, a quickening of your heart. 

How are you going to pay it all off in addition to your student loans, rent and trying to save a little something? What if your credit score tanks

You're not alone in your indebtedness — or your panic. American households hold an average of around $16,000 in credit card debt according to a survey of data from the Census Bureau and Federal Reserve by NerdWallet

That includes an average of $1,292 paid toward credit card interest alone this year. The study suggests the interest payments could increase to $1,309 in the wake of the Federal Reserve's vote on an interest rate hike of a quarter of a percentage point. 

When will this whack-a-mole game of using all of your income to pay off debts stop?

Earning more money and cutting out excess expenses will help. And establishing a budget is a key part of any debt recovery. 

But if the traditional measures still aren't making a dent, then you may also need to change the way your debt is structured as part of a larger repayment plan.

One way to do that is to consolidate your credit card debt. That's the process of putting one balance onto another card to reduce the number of payments you need to make each month. If the math works out, this will end up lowering the overall interest rates you are paying. 

The strategic move does not come without pitfalls, though. Here's how to know whether credit card debt consolidation is right for you.

What is credit card consolidation?

Credit card consolidation, like other forms of debt consolidation, is where you combine your unsecured credit card debt in a strategic way to minimize payments and lower your interest rates. 

Debt consolidation comes in many forms. You can consolidate your student loans. You can consolidate many kinds of unsecured loans or outstanding bills — like personal loans or medical bills — and make one single payment. None of these are a quick fix, but part of a larger financial plan. 

First you need to determine if your debt is insurmountable or manageable. 

If your debt is half of your gross annual income or if you can't expect to pay off your debt in five years, you should explore credit counseling — because sometimes you do actually need to bring in a professional who will create a debt management plan for you.

But in other cases, taking things into your own hands and consolidating your loans may be a strategy to streamline payments.

How to consolidate credit cards?

To pull all your credit card debt together in one place, you're essentially going to pay off your current credit cards with a 0% interest balance transfer card.

The strategy is to get your debt off of your high interest rate cards and on to a card with a low or 0% interest rate and a low fee for balance transfers. 

The low interest rate balance transfer credit card will offer you some relief relative to your higher-interest rate cards — but only for a time. 

You will have typically 12 to 18 months with the low introductory rate during which you should aggressively pay down your debt. 

First you will need to find a 0% interest balance transfer card. NerdWallet has a selection of some of the ones it likes best, but you may also get an offer from your bank.

There will also be a balance transfer fee. You'll want to look for the lowest one. It is usually a percentage of the amount of debt you are transferring. 

The most important thing to know about these kinds of cards is the 0% interest rate will reset, usually after 12 to 18 months. According to the Consumer Financial Protection Bureau the introductory rate must stay in effect for at least six months and the card issuer must clearly tell you when the rate will change and what the new rate will be after the reset.

Here's the rub: The new rate could be the kind of rate you were paying before — 12% to 24%, for example. With a new higher balance on this card since you dumped all your debt onto it, that interest rate will hurt. You'll need to have a clear plan of attack to get the debt paid off during the 0% interest window, or else you could wind up in even worse shape than when you started.

What if you don't pay off the debt during the 0% window?

If you aren't able to dispatch your credit card debt during the 12 to 18 months of 0% interest, you may need to find another balance transfer card.

"Sure, you can move debt around from one balance transfer offer to the next, but each time you do this you generally face a 3% fee, which quickly adds up," says NerdWallet credit card expert Sean McQuay. "Eventually, the daisy chain of balance transfer offers will end and your debt will be due."

Another by-product of putting all of your debt on one card is your debt utilization, or the amount of debt you owe in relation to the cards' limits, may go high enough to damage your credit. 

If you are not making a dent in the debt, you may need to seek professional help from a nonprofit credit counselor.

But if you're able to dedicate yourself to paying down your debt during one, or maybe two cycles on a balance transfer card, you can break free from panic-inducing credit card debt.