Credit Card Refinancing vs. Debt Consolidation: Pros, Cons, and Best Use Cases

When you’re deciding how to pay down credit card balances, the choice between credit card refinancing vs. debt consolidation depends on your budget, credit score, and payoff timeline. Refinancing can help you refinance credit card debt at a 0% intro APR, while a debt consolidation loan may be better if you need more time or want a predictable monthly payment.

Both strategies can help you get rid of high-interest debt, whether you prefer a promotional APR period or a structured credit card refinance loan alternative.

Table of Contents

1. What does credit card refinancing mean?
   1. Do you need a loan?
   2. How to refinance credit card debt in 5 steps
   3. Pros and cons
2. What is debt consolidation?
   1. Pros and cons
3. Which is better?
4. Should you consider debt relief services instead?
5. FAQ

What does credit card refinancing mean?

Credit card refinancing simply means moving an existing balance from one credit card to another with a lower interest rate. 

It’s more commonly referred to as a balance transfer. For example, you might have a $5,000 balance at 17.99% that you transfer to a new credit card offering a 0% APR for 18 months. 

Because many credit cards have interest rates as high as 15% to 20%, transferring a balance to a card with a low or 0% interest rate can save hundreds or thousands of dollars while you pay off your debt. Of course, that assumes you pay the transferred balance in full before the promotional rate ends.

Credit card balance transfers limit how long you can enjoy a 0% APR. Depending on the card, it may be anywhere from nine to 21 months. If you still owe a balance once the promotional rate ends, the regular variable APR will apply to the remaining amount.

Do you need a loan to refinance credit card debt?

No; refinancing credit card debt doesn’t involve taking out a new loan. It’s done through a balance transfer.

A credit card refinance loan isn’t a separate product; people often use that phrase when they actually mean a debt consolidation loan. If you prefer borrowing a lump sum at a fixed rate, that would fall under debt consolidation, not refinancing.

How to refinance credit card debt in 5 steps

If you’re considering refinancing (using a balance transfer), here’s a quick step-by-step look at how the process typically works:

1. Check your current balances and APRs. Know exactly how much you want to transfer and what you’re paying now.
2. Compare balance transfer credit cards. Look for 0% APR promotions with terms long enough for you to repay the balance.
3. Apply for the new card. Approval typically depends on your credit score and income.
4. Transfer your balances. Once approved, choose the balances you want moved to the new card. This usually comes with a 3% to 5% transfer fee.
5. Pay off the balance before the promo period ends. Make a payoff plan so the regular APR doesn’t apply to any remaining balance.

Advantages and disadvantages

Credit card refinancing can offer tangible benefits if you’re ready to pay off your balances, but it’s not necessarily ideal in every situation. Here are some pros and cons to consider.

Pros

• It’s possible to reduce your APR to 0%, allowing you to save a significant amount on interest.

• Applying for a credit card balance transfer is faster and easier than applying for a loan to pay off debt. 

• Transferring balances can streamline monthly debt payments and potentially raise your credit score over time. 

Cons

• Introductory rates have a time limit, and the regular variable APR could be much higher. 

• Balance transfer fees of 3% to 5% may apply, increasing the total amount you’ll pay back to the credit card company. 

• Paying only the minimums may save you little in interest if part of your balance eventually becomes subject to the regular APR.

• If you are applying for a new credit card, a hard credit check will be run and could reduce your credit score by a few points. 

Credit card refinancing could save you money and help you get out of debt faster. But you might pay more in fees and interest if you can’t pay the balance in full before the promotional rate ends.

What is debt consolidation?

Debt consolidation is the process of combining multiple debts. This is usually done through a debt consolidation loan, which is a personal loan used specifically to pay off debts. You’d use the loan proceeds to pay off your debts, then repay what you borrowed to the lender with interest. 

It’s possible to find secured and unsecured personal loans ranging from $1,000 to as much as $100,000. If approved, you could use a debt consolidation loan to pay off:

• Credit cards
• Retail store cards
• In-house financing
• Medical debts
• Installment loans
• Other personal loans or lines of credit

Personal loans charge interest, and while you likely won’t find a 0% APR option, it’s possible to lock in a low, fixed rate if you have good credit. Loan terms can range from 12 to 84 months, depending on the lender, and since rates are fixed, your monthly payments are predictable. 

Advantages and disadvantages

Similar to credit card refinancing, debt consolidation has both pros and cons. Here are some to keep in mind before applying for a loan:

Pros

• Debt consolidation allows you to combine multiple debts at a fixed interest rate. 

• Consolidating debts can minimize the number of monthly debt payments you must make. 

• Fixed interest rates make it easier to plan for monthly payments and calculate how much interest you’ll pay over the life of the loan. 

Cons

• Some lenders charge origination fees for debt consolidation loans, which are deducted from the loan proceeds. 

• Debt consolidation loan rates can be as high as credit card interest rates for borrowers with less-than-perfect credit. 

• Continuing to use your credit cards after consolidating balances with a loan could lead you deeper into debt.

• Applying for a personal loan will result in a hard credit check, potentially lowering your credit score a few points. 

Bottom line? A personal debt consolidation loan could make it easier to handle credit card debt and save a little bit of money on interest. However, it’s not a foolproof solution if you still use credit cards to create new debt.

Debt consolidation or credit card refinancing: Which is better?

If you’re considering debt consolidation vs. credit card refinancing, it helps to understand how they compare. In terms of their differences, the biggest things that set them apart center on interest rates, fees, repayment terms, funding, and credit score requirements.

Quick comparison at a glance

• APR ranges:
  • Refinancing: typically 0% intro APR
  • Consolidation: ~5.99% – 35.99%
• Timeline:
  • Refinancing: 9 – 21 months
  • Consolidation: 24 – 144 months
• Requirements:
  • Refinancing: requires good credit for top 0% APR offers
  • Consolidation: lenders often require a minimum ~580 credit score
• Hard credit pull:
  • Refinancing: yes, for most new credit card applications
  • Consolidation: yes, for most personal loans

What is credit card refinancing vs. debt consolidation right for? The short answer is that it depends on your personal financial situation. 

Some of the factors to consider when deciding which option to pursue include:

• How much debt you currently have and the interest rate you’re paying to each one. 
• Whether you’d also like to consolidate or pay off debts other than credit cards, such as medical loans or installment loans. 
• Your credit scores and which refinancing or debt consolidation options you will most likely qualify for. 
• How quickly you’d like to be able to pay off debts. 
• What you can realistically afford to pay toward your debt each month. 

Here’s a closer look at when each option might be best for you.

Consider credit card refinancing if…	Debt consolidation might be better if…
Your primary goal is to minimize the amount of interest you pay.	You need a longer timeframe to pay off debt and don’t mind paying interest.
You’re comfortable paying a balance transfer fee, or you can find a card that waives the fee.	You can qualify for the lowest personal loan rates and the best terms based on your credit score.
You know you’ll be able to pay the balance in full before the promotional rate ends.	You need to pay off more debt than you can consolidate with a credit card.

Credit card refinancing might be right if you’re confident you can pay off the balance before the promotional rate ends. Let’s return to our previous example:

• You have $5,000 in credit card debt.
• You qualify for a card offering a 0% APR for 15 months. 
• You’re charged a 5% balance transfer fee, which adds $250 to your payoff total. 
• You’d need to pay $350 per month to clear the balance before the promotional rate ends. If you’re not able to manage that payment, you should look for a card with a longer 0% APR term or consider a debt consolidation loan instead. 

Now consider this example using a debt consolidation loan:

• You take out a $5,000 loan at 5.99% with a 24-month repayment term. 
• Your monthly payments would drop to $221, which could be more workable for your budget. 
• The trade-off is that you’d pay $317 in interest instead of $0 interest with a balance transfer card. 

Should you consider debt relief services instead?

Debt relief services might make sense if credit card refinancing or debt consolidation won’t work for your situation. Unlike refinancing (which requires fast repayment) or consolidation loans (which require good credit), debt relief focuses on negotiating your balances down so you owe less overall.

Here’s when debt relief may be a better fit:

• You can’t afford the payments required for 0% APR credit card refinancing. Balance transfers only help if you can clear the balance before the promotional rate expires.
• You don’t qualify for a low-rate debt consolidation loan. Consolidation is cheapest with good credit; otherwise, loan rates may be similar to credit card APRs.
• You’re already behind on payments or at risk of default. If your debt is unmanageable, debt relief may provide a structured way to settle for less than you owe.

Debt relief does have trade-offs: Your credit score will drop while you’re in the program, and forgiven debt over $600 may be taxable. But for borrowers who can’t realistically repay their balances through refinancing or consolidation, it can offer a long-term path out of debt.

Check out our recommended debt relief provider: National Debt Relief (Best Overall)

If you’re considering debt relief, National Debt Relief is our top-rated provider. It works with most unsecured debts, including credit cards, personal loans, payday loans, and medical bills, and negotiates with creditors to settle balances for less than you owe.

There are no upfront fees, and you only pay a service fee (up to 25% of enrolled debt) after you approve a settlement and make your first payment. For borrowers who can’t qualify for a low-rate consolidation loan or can’t pay off a balance transfer in time, National Debt Relief may be the most affordable path to becoming debt-free.

Here are our top three choices for the best debt relief companies:

FAQ

How does credit card refinancing affect my credit?

Applying for a new balance transfer credit card can result in a hard inquiry being added to your credit. That may trim a few points off your score. 

If you don’t charge new balances to your cards, refinancing could improve your score over time if you’re making timely payments and steadily reducing your debt. 

How does debt consolidation affect my credit?

Debt consolidation can also trim a few points off your credit score if the lender does a hard credit check when you apply. But it’s possible to recover by making on-time payments and not charging any new balances to the cards you paid off. 

Are there alternatives to consider to eliminate credit card debt?

A debt management plan (DMP) can help you pay off credit card debt while reducing interest rates and fees. 

You consult with a debt counselor or credit counselor who gets your creditors to agree to the plan. You then make one payment to the debt management plan each month, which is distributed among your creditors. 

Debt negotiation is another option in which you get the credit card company to accept a payment of less than what is owed. 

While this can lower your debt amount, it can damage your credit score, as creditors may be unwilling to make a deal unless you’re on the verge of default. In addition, the forgiven debt will be reported as taxable income if the amount is more than $600.