What Is Credit Card Refinancing vs Debt Consolidation? We Break It Down

What Is Credit Card Refinancing vs Debt Consolidation? We explain the key differences and when to use each…

Updated February 2024

Fact checked by John Wayman

What Is Credit Card Refinancing vs Debt Consolidation

These two finance options are related, but definitely not the same thing. 

So if you know you need to get out of debt, including credit card debt, but are wondering: what is credit card refinancing vs debt consolidation? You’ve come to the right place. 

We’ll explain what each term means exactly and their key differences, then we’ll do a bit of a deep dive into how each debt improvement plan works. 

The concept in brief: the difference between credit card refinancing and debt consolidation

These are related and similar concepts, so the specific differences and mechanics of how they work can be confusing to many people. Especially if you’re not deep into finance!


Credit card refinancing

  • Refers to transferring the balance (the debt) on a credit card to another loan, most often to another credit card.
  • Typically, what people are trying to achieve is to transfer their credit card debt onto another credit card that has a lower interest APR, lower fees, or both.
  • This is often called a “balance transfer.”
  • Oftentimes, credit cards offer balance transfer incentives, like low or 0% introductory APRs for a period of time (often 12-15 months).
  • Credit card refinancing does not HAVE to be done from a credit card onto another card, though, you can also refinance onto another type of loan, like a personal loan or line of credit.
  • There are some drawbacks, you will often have to pay a “balance transfer fee,” particularly when refinancing from one credit card to another.

Debt consolidation

  • Refers to using one loan to pay off and combine several others. Usually combines into an installment loan. 
  • Similarly to credit card refinancing, this is usually done to move several types of debt into one loan that has a lower APR and/or fees. Debt consolidation can often lead to borrowers having one loan in the 8-12% interest rate range (note: this is a rough guideline), instead of many loans at higher interest rates.
  • While not technically required, this typically refers to moving several types of debt into a personal loan, rather than onto a credit card. Although, you could theoretically consolidate several loans onto a credit card, provided all of the lenders let you pay off the balance with that card.
  • In a sense then, credit card refinancing can be thought of as one type of debt consolidation.
  • Often allows the borrower to make one fixed, monthly payment, instead of having to manage several payments, which may have different amounts each month due to ongoing internet accrual and/or variable interest rates. 
~$6K average credit card debt per borrower

Credit card refinancing can be a positive way to reset your relationship with credit cards and debt

Consider your options

If you have gotten yourself into a situation where you have high credit card debt on a card that is charging you a high APR, you may feel like you are in big trouble. But, you likely have several options. You will also tend to have more options the better your credit score is and the more assets you have that you can pledge as collateral for a loan.

The main options you have to refinance are:

  • Balance transfer to another credit card. Oftentimes, you can get a balance transfer introductory APR of 0% for 12-18 months. This can give you some breathing room to pay down the balance on the card, without continuing to incur high interest charges, which only add to the problem. Know going in though, that you will likely have to pay a balance transfer fee of around 3-5%. While this might be slightly annoying, it’s much less than the average credit card APR of ~22%, which you will pay if you take no action for another year.
  • Personal loan. This is another common option. You can take out a personal loan and pay off your credit card, then begin to pay down the personal loan. Oftentimes, personal loans can have lower interest rates than credit cards, but not always. It will depend highly on your credit score and history. It’s not uncommon to be able to get a personal loan of up to $50K if you have good credit.
  • Line of credit: It may be difficult to obtain a line of credit if you have a high credit card debt and low or no assets to pledge as collateral. But if you do have assets to pledge, you may be able to get a line of credit, which you can use to pay off your high-interest credit cards. You can then focus on paying down your line of credit, which tends to have substantially lower interest rates than credit cards. There are many different kinds of lines of credit including Home Equity Lines of Credit (HELOCs), Securities Backed Lines of Credit (SBLOCs), and more. Remember, if you pledge collateral, like your home, you could lose that collateral if you don’t pay back what you borrow on the loan – these are not risk-free!
  • Other options: There are other options for refinancing a credit card. For example, you can borrow from your 401K or borrow from friends or family. These are a little more unusual and you should probably consider the options above first, but there are opportunities to find more creative financing.

Weigh the pros and cons

When you’re switching your financing strategy, remember to take time to weigh the pros and cons of your new strategy. For example, while a HELOC might help you get out of debt with a lower interest rate, you have to pledge your house as collateral. So you will want to make sure you have a solid plan to make the payments!

Take action

Remember that while you are taking your time exploring other financing options, your credit card debt continues to accrue interest charges. Since credit card debt is usually the highest interest-rate debt, it’s better to take action soon, rather than wait to find the perfect solution.

Of course, it’s still prudent to take a few days or a couple of weeks to learn about your options and shop around, just don’t wait months or years!

Develop a plan for consistent long-term finance and debt management

If you have found yourself in the position of having high credit card debt, you may want to consider getting professional help. There’s nothing wrong with doing this, as we all are good at different things and some people are not good at managing their finances.

However, if you know you’re not great at managing your finances you can try a few things:

  • Ask a family member who is great with personal finance to help you manage your finances.
  • Consider seeking out a debt counselor. Many are free! Try searching for nonprofits in your area that offer free debt counseling services. We like the long-running and well-established National Foundation for Credit Counseling.
  • Think about hiring a financial advisor. Make sure they are flat-fee only and a fiduciary.
40% of personal loans are taken out to consolidate debt

Debt consolidation can be a wise choice for getting your loans and debts under control

Consolidating your debts into one place can make things much easier to manage. Most people who consolidate end up with a fixed-rate installment loan with a 3-5 year duration.

Consider that you can still use many of the options described in the section above to accomplish a debt consolidation, like a personal loan or HELOC. 

Unlike having to remember to pay multiple loans or credit cards, sometimes with varying payment amounts each month, this features one fixed, predictable monthly payment.

Unfortunately,y this industry has many bad actors. We suggest sticking with a reputable non-profit debt relief assistance organization.

So credit card refinancing vs debt consolidation … which is right for me?

Regardless of which type of high-interest debt you have, whether it’s on a credit card or through another type of loan, be sure you consider all of your refinancing options. Remember that not all types of loans are eligible to be consolidated. Often secured loans, like mortgages and auto loans, are not eligible, nor are student loans (usually).

As we have discussed above, you can use several different lending products to either consolidate your loans into one place and/or to get a lower interest rate.

Remember to consider that some of these products do have drawbacks, like requiring you to pledge collateral.


Editor's Note:

At Personal Finance Guru, we want to help you maximize your lifestyle through personal finance. You can trust the integrity of our independent financial advice. Our opinions are our own and have not been provided, reviewed, approved, or endorsed by any advertiser or financial product provider. To support and grow the site, however, we may receive compensation from the issuers of some products.

Meet our Personal Finance Experts:

Cody Beecham

Cody Beecham


Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School. 

After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.

Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income. 

He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?

Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.