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Credit Card Refinancing vs. Debt Consolidation

Credit Card Refinancing vs. Debt Consolidation

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In the fourth quarter of 2020, Americans racked up approximately $820 billion in credit card debt alone. Just a year prior, in 2019, American credit card debt peaked at approximately $930 billion. One more statistic: the average American household has racked up approximately $5,315 in credit card debt. It’s safe to say that almost all Americans are in the same boat. Credit card debt can certainly feel hopeless at times, but luckily there are plenty of debt relief options out there and O’Bryan Law Offices wants to help you figure out which one is best for you. Below, we explain the difference between credit card refinancing vs. debt consolidation. For more debt relief help, call an O’Bryan Law Kentucky bankruptcy attorney at 502-400-4020.

What is Credit Card Refinancing?

Credit card refinancing is basically when you transfer all your credit card debt onto a single card that has a temporary 0% interest transfer option and a large credit limit. In order to do this, you must have a fairly high credit score. The whole point of credit card refinancing is to pay off all your debt during this temporary grace period of approximately 12 to 18 months. After this window of time, the 0% interest will jump to the usual 16% to 20% interest rate.

What is Credit Card Debt Consolidation?

Another option for paying off credit card debt is taking out a low-interest loan and using it to pay off your credit cards. But you have to qualify for this type of loan. If you have a stable, full-time job with a good credit score and possibly a house, you may be able to pay off your credit card debt this way.


You could also take out an unsecured personal loan and use it for the same purpose, however, this may be more difficult than the previous option because you’re not offering collateral. You’ll likely have a high interest rate on this loan without offering collateral. But it might still be lower than the interest rates on your credit cards that haven’t been paid off.

Credit Card Refinancing vs. Debt Consolidation

Credit card refinancing and debt consolidation are two different methods that can eventually help you pay off your credit card debt. They are both great and effective options for debt relief, but it all boils down to which method is best for you.

Pros and Cons of Credit Card Refinancing

There are certainly pros and cons to everything in life. But when it comes to credit card debt, it’s crucial to consider all of the pros and cons of the debt relief options in front of you. Listed below are the pros and cons of credit card refinancing.

Pros of Credit Card Refinancing

  • You will undoubtedly save money if the card has a large enough credit limit to cover all of your existing credit card debt.
  • For the duration of the credit card’s promotional 0% interest rate, you won’t have to pay interest on your credit card debt. This will hopefully allow you to pay off your debt easier and quicker.
  • Credit card refinancing is generally easy if you have a high enough credit score.
  • You could completely pay off your debt if you use your credit cards less during the course of refinancing.

Cons of Credit Card Refinancing

  • If you don’t have a credit score of at least 670, you may not qualify for a 0% interest rate credit card. Additionally, you may need to have a credit score of at least 700 to receive more than six months of 0% interest on a credit card. But each credit card company will have different qualifications.
  • The 0% interest rate doesn’t last forever. It generally lasts between 12 to 18 months. If you don’t pay off the majority of your debt in that time frame, you’ll be back to 16% to 20% interest rates. If you haven’t paid off most of your debt by the time the interest rate jumps, you may find yourself in a similar situation as before you refinanced your credit cards.
  • This method may not be effective if the credit limit on your new card isn’t sufficient enough to cover the majority of what you owe on your existing cards.
  • When you transfer all your debt to this new credit card, you will probably face 3% to 5% fees on the transferred balance.
  • You could lose the 0% introductory rate if you make a late payment or go over the credit limit.
  • It’s possible that you won’t be able to transfer balances between cards from the same lender.

Pros and Cons of Credit Card Debt Consolidation

If you need more time to pay off your debt at a much lower interest rate, consolidation may be a better option for you. Listed below are the pros and cons of credit card consolidation.

Pros of Credit Card Debt Consolidation

  • Lower interest rates compared to refinancing.
  • 3 to 5 year repayment period.
  • Monthly payments are set in stone.
  • Instead of dealing with multiple credit card bills, you’ll just have that one monthly payment.
  • You don’t need collateral if you’re getting a personal loan.
  • You could have low or even zero interest and easier repayment terms if you can get a personal loan from loved ones.

Cons of Credit Card Debt Consolidation

  • If you use your home as collateral for a loan through a home equity line of credit (HELOC) or home equity loan, you could lose your home entirely if you can’t keep up with the monthly payments.
  • Personal loans may take a while to process.
  • Various consolidation fees can pile up quickly.
  • If you can’t control your credit card spending in the 3 to 5 years that you’re making monthly consolidation payments, you might find yourself crushed under the weight of debt again.

Why Should I Choose Credit Card Refinancing?

Only you can choose which credit card debt relief route is best for you. One of your biggest deciding factors is: how quickly do you want to pay off your debt and how quickly do you think you can actually do it? Refinancing is the quicker route to debt relief if you can make regular payments and if you can cut down on your credit card spending. The slower route is consolidation, which can take 3 to 5 years with fixed monthly payments.


Basically, you should choose credit card refinancing if:

  • Your credit score is above 680.
  • You’re positive that you can pay off your credit card debt in 12 to 18 months on a 0% interest rate card.
  • The credit limit on the card is high enough in order to transfer all your debt onto the new card.
  • You want to lower your monthly payments which will allow you to pay everything off easier.

Why Should I Choose Debt Consolidation?

You should choose credit card debt consolidation if:

  • There’s no way you can pay off your credit card debt in 12 to 18 months, even with a 0% interest rate card, simply because you have too much debt.
  • You own a house that you could use as collateral for a loan. Owning a house will allow you to qualify for HELOC or a low-interest second mortgage.
  • You’re qualified to receive a personal loan that makes the best financial sense for you.
  • You can definitely afford to make monthly payments on a loan for 3 to 5 years.

Consider a Debt Counseling Course

If either of those debt relief options are simply unattainable for you because your debt is too overwhelming or your credit score is too low, there are other options out there. You could undergo debt counseling with O’Bryan Law Offices or even file for bankruptcy. But most people want to avoid bankruptcy at all costs, understandably so.

What is Debt Counseling?

Basically, debt counseling is an alternative to filing for bankruptcy. A debt counselor will work with your credit providers in order to hopefully relieve your debt. Additionally, a debt counselor will help you manage your finances through budgeting and debt management. While you do have to pay for this service at O’Bryan Law Offices, we will include the cost in your new payment plan that your counselor will help you build.


By the end of debt counseling, you should have your credit card debt under control along with knowledge about how to keep it under control.

Call Bankruptcy Attorneys at O’Bryan Law Offices Today

If you still need help deciding what route is best for you – credit card refinancing vs. debt consolidation – O’Bryan Law Offices wants to help. Our main goal is to give you a life of financial freedom, whether that be through credit card refinancing, debt consolidation, debt counseling, or even through a bankruptcy filing. For more financial help, call us today at 502-400-4020 for a free consultation.

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