What Is Credit Card Refinancing?

Debt can be extremely stressful, and credit card debt, with its high interest rates, can be the most stressful kind of debt. Maybe you can make the minimum payments, but with the interest adding to your balance every month, you might not feel like you’re making much progress.

That’s where credit card refinancing can come in. You have a few options for refinancing that debt to a new credit card or a loan with a lower interest rate. Hopefully, with a little breathing room, you’ll be able to steadily pay down your credit card debt until it’s gone.

What is credit card refinancing?

Credit card refinancing is the process of moving your credit card debt from one credit card to another or getting a loan to pay off your credit card debt. Just like you would refinance your mortgage by finding one with a lower rate (and thus a lower monthly payment), your goal with a credit card refinance is to reduce your balance so you can pay it off faster.

Here are some different ways to refinance credit card debt and get on the road to a better financial situation.

Refinance credit card debt with a balance transfer

Many credit card companies would like to earn your business by offering you a balance transfer card with a 0% introductory APR. If you move your credit card debt to one of these cards, you could go from paying 15% interest or more to paying no interest for a period of 12 to 24 months. That could really help you pay down the debt.

This option is best for those with a smaller amount of debt that could feasibly be paid off within the introductory period. Use the tool below to find the ideal balance transfer card for you, all of which come with 0% introductory APR.

What you need for a balance transfer card

In order to complete a balance transfer, you will need to compile some information.

• Dollar amount. You will need to know the exact dollar amount you want to transfer from your old account or accounts.
• Account numbers. Make sure you have the account numbers handy for any of the cards you are moving balances from.
• New credit card limit. Make sure you don’t exceed the credit limit of the new card. Leave yourself some wiggle room in case you need to use the card.
• Time frame. Complete the transfer within 60 days, or the time frame set by the credit card issuer, in order to get the best terms.

Refinance credit card debt with a debt consolidation loan

Another option to consider is a debt consolidation or credit card refinancing loan, both of which refer to personal loans. Whatever you call it, the idea is to take out a personal loan with a lower interest rate to pay off your credit card bills in one fell swoop. This consolidates your various payments into one payment with regular installments, which might help you stay focused on paying down the debt.

Debt consolidation can also prevent you from having to keep track of different payment due dates and minimum amounts, which could cause you to miss a payment or be late. This is a better option for someone with a large amount of credit card debt that needs more time to pay it off.

The risks of a debt consolidation loan

There are a few issues to consider before taking out a debt consolidation loan:

• Getting approved. A large amount of credit card debt may have hurt your credit scores, making you a more risky borrower. Make sure you are truly getting a rate that’s lower than your credit cards and that you can borrow the amount you need.
• Extra fees. As with balance transfers, there may be additional fees (such as origination fees) you didn’t plan on. As always, do your homework before you take out the loan.
• Hurting your credit scores. If your credit scores are already low, you don’t want to lose more points by getting hard inquiries on your account. Look for a lender that lets you check your prequalified rate with a soft pull that doesn’t affect your credit score.

If you think a loan might be a good option for you, check out our list of the best debt consolidation loans. You can also read more about the benefits and drawbacks of credit card debt consolidation personal loans.

Fortunately, SuperMoney allows you to compare your personal loan options without hurting your credit score. Take a look at the lenders below to get started.

Refinance credit cards by taking out a HELOC

A home equity line of credit (HELOC) is similar to a credit card, but it lets you use your home as collateral. Because of that secured debt, your interest rate should be quite low.

You could use the HELOC to pay for your high-interest credit card debt. That being said, make sure that any fees associated with the HELOC, such as an annual fee, don’t add up to more than the interest savings. You would also be in pretty big trouble if you can’t pay the HELOC back and lose your house as a result.

Refinance credit cards by taking out a home equity loan

You can use a home equity loan for more than upgrading your house or getting a new roof (or even buying a car). It may also be a good option to consolidate credit card debt. If you have enough equity in your home, you could take out a loan using your home as collateral, which (similar to a HELOC) would help you get a low interest rate.

The downside to using a home equity loan

The downside to using a home equity loan for credit card refinancing is that you won’t be able to use the loan if you do need to do some home repair. And, just like with a HELOC, if you aren’t able to make the monthly payments, you could be putting your house at risk.

Should I refinance my credit card debt?

If you’re really struggling to make the monthly payments on your credit cards, you should seek a solution before it gets any worse. However, there are risks and benefits to every type of credit card refinancing. Here are some factors to consider before refinancing credit card debt.

Other debt management options

If you’re facing an overwhelming amount of debt and none of these options seem right for you, you might want to consider a debt management plan with a credit counseling agency (there may even be a nonprofit credit counseling agency willing to work with you). However, if you prefer a different approach, you may want to look into the services of a debt settlement company instead.

FAQs

What is credit card refinancing vs. debt consolidation?

They both refer to moving debt from one credit card or loan to another. But in the case of debt consolidation, you are moving multiple debts into one new debt, hopefully with a lower interest rate.

Will refinancing hurt my credit?

Refinancing credit card debt should not hurt your credit unless applying for a loan causes a hard credit inquiry. Look for loans that show you a preapproval rate.

That being said, if you make late payments on your new card or loan, that will definitely hurt your credit.

When should you refinance your credit card?

You should think about credit card refinancing when you aren’t making any progress paying down your credit card debt. Be sure to choose an option with manageable interest rates and terms.

Cara Corey

Cara Corey is a writer and editor who loves to help people make sense of confusing topics. Her work has been featured in many blogs, newspapers, and magazines, including the Des Moines Register, Boulder Daily Camera, Better Homes and Gardens, and Parents Magazine.