Credit card debt is expensive because interest keeps compounding while you pay it back slowly. To consolidate credit card debt means swapping several cards for a single, cheaper or simpler way of paying. It only helps if the new route costs less overall and you don't run the cards up again.
UK consolidation options compared
| Option | How it works | Watch for |
|---|---|---|
| 0% balance transfer card | You move balances to a card with a 0% interest period | A transfer fee, usually a percentage of the balance, the rate after the period ends, and needing a good credit score |
| Debt consolidation loan | One fixed-rate loan pays off your cards | The rate depends on your credit, and a longer term can mean paying more interest overall |
| Debt management plan | Arranged free through debt charities, with one monthly payment shared between creditors | Interest may not be frozen, and the plan is recorded on your credit file |
| Secured loan or remortgage | Borrowing against your home at a lower rate | Your home is at risk if you can't keep up the payments |
The sums that decide it
Before you choose, compare three numbers: the new interest rate against your current blended rate, any fee, and how long it will take to clear the debt.
As an illustration, a 0% transfer with a 3% fee on £4,000 costs £120 up front. If your cards charge around 25% APR, that £4,000 costs roughly £83 a month in interest, so the fee is covered in under two months. That only holds if you can clear the balance before the 0% period ends, because the rate afterwards is usually high.
When consolidation isn't the answer
What a good outcome looks like
A successful consolidation ends with a clear finish date and a lower total cost than you were facing before. Write down your payoff date, the total interest you expect to pay and the monthly amount, and check your progress every few months. If you can pay more than the minimum, do, because even small overpayments cut the interest and shorten the term. Keep a small emergency fund alongside, so that an unexpected bill doesn't push you back onto the cards.
If you can't afford the payments on any of these options, or your credit is poor, consolidation can make things worse. Get free advice first. See our guides to the Debt Relief Order and other options, to negotiating a debt settlement yourself, and to loans for very bad credit.
Traps to avoid
- Running the cards back up after you have cleared them, which is the most common way consolidation fails
- Choosing a longer term to cut the monthly payment, which raises the total interest
- Paying a company to arrange it. Free debt charities can help with a plan at no cost
- Securing the debt against your home without understanding the risk; our guide to home equity loans in the UK explains it
- Missing the end date of a 0% period and falling onto the standard rate
Steps
- List every balance, its interest rate and its minimum payment.
- Check your credit file, and use eligibility checkers that do a soft search before you apply.
- Compare the total cost of each option, not just the monthly payment.
- Set up a Direct Debit for more than the minimum.
- Stop using the old cards until the debt is cleared.