5 Things to Consider Before Consolidating Your Credit Card Balances

May 7th 2016

Check Your Credit Score

Make sure there are no errors on your credit report before you start the consolidation process. Take the time to correct any errors so you don't find yourself unapproved for consolidation. You're entitled to received a free credit report annually, so take a look at it before you get too far ahead.

Don't Close Old Credit Card Accounts

Your likely goal in consolidating your credit is to improve your credit score. However, if you don't handle it right, you could actually hurt your credit score. Keep your credit card balances at about 30 percent of your total available credit to prevent your credit card scores from dropping.

If you transfer your balances to a new card and leave the old card account open, your overall balances should drop to a lower percentage compared to your total available credit. If you close those old accounts, however, your debt balance could skyrocket, dropping your credit score.

In addition, the older a credit account is, the better it reflects on your credit score; if you close those older accounts and are only left with the new consolidation account you just opened, you're going to harm your credit score. Hang on to the old accounts, but hide the cards away so you're not tempted to use them.

Make a List of Your Credit Card Debts

While you may be tempted to get rid of the card that has the highest balance outstanding or the account that has the most persistent debt collectors calling, you should make a clear inventory of your debts instead. Put them in order according to interest rate. Then, as you prepare to transfer balances to credit cards with a lower interest rate, start with those accounts that have the highest interest rates.

Find a Low-Interest Rate Card for Your Transfer

Many credit cards offer introductory interest rates to lure customers to transfer balances. Make sure you read the fine print to understand exactly what the new card is offering. Pay special attention to the introductory annual percentage rate, note what that rate applies to and see how long the introductory offer lasts. It doesn't do you any good to get into a 0 percent introductory interest rate if that rate only lasts three months, and then jumps up to the level of your old credit card.

If the APR only applies to balance transfers, make a vow not to use the new card for any actual purchases. In addition, look out for balance transfer fees, which sometimes can be as high as 5 percent of the total transferred.

Look at All Your Options

A new credit card may not be the best possible option for your balance consolidation. Ask whether your bank or credit union can make you a loan that lets you wipe out your credit card balances right away, giving you one lower payment to handle each month. Make sure you're dealing with a reputable lender, as there are many credit consolidation scams on the market.


Consolidating your credit card balance can be just the right move if you find yourself with several balances on high-interest credit cards. Merging all those balances onto one card with a lower interest rate can ease the pressure of making multiple monthly payments. However, before you take this important financial step, you should consider a few key factors.

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