“What credit card refinancing options do you recommend?”

What are some credit card debt refinancing options you recommend?

Submitted by anonymous.

My favorite approach to debt reduction is a payment plan. It helps you reduce interest by paying the debt in a way that works within your budget. A payment plan also minimizes the risk of consolidating, which can incur additional debt.

If you decide that refinancing or consolidation are best for you, here are a few options to consider:

  • Balance transfer to a 0% rate card: This seems easy enough, but there are some factors that you should think about:
    • Are you opening a new credit account or using an existing card? New accounts impact your credit score, so think about this before taking this step.
    • Can you manage your spending and avoid increasing your overall debt? If you pay off one card by using another, how will you manage that “open” line of credit?
  • Consolidation loans: This can be a good choice, but watch those interest rates AND be sure you have a spending plan that helps you stay on track so you don’t continue to use the cards you paid off.
  • Home equity lines: This is NOT a good option. Credit card debt is “unsecured,” which means you don’t lose any collateral (an asset that the creditor can take if you don’t pay), but if you use a home equity line to consolidate, you put your home at risk by “securitizing” the debt.
Using a tool like this debt reduction calculator can help you find the best of both worlds: you can build a plan to reduce the debt without additional consequences or fees.
Saundra Davis

Saundra Davis is a nationally recognized financial coach and educator. Her experience in the U.S. Navy, where she made EVERY money mistake possible, and her twenty years serving community-based organizations led her to the reality that the best way to help people find a path out of poverty is to help them become their OWN financial expert.