How to Refinance Credit Card Debt and Pay It Off Faster

While credit cards have many benefits, credit card debt is not one of them. U.S. households have a total of $1.14 trillion in credit card debt, and it can feel suffocating if your income doesn’t keep up with those payments and your other bills.

One strategy for reducing your interest payments is credit card debt refinancing. I’ve been through mortgage refinancing to get a lower interest rate on housing debt, but credit card refinancing can be an even simpler process.

Your goal with refinancing is a lower APR, which saves you money and can help you pay off debt faster. Let’s dive into the different ways to refinance your credit card debt and how they can help you.

When is credit card debt refinancing a good idea?

You may be a good candidate for refinancing if:

• Your credit card is charging you a high APR, and you may get a lower APR or interest rate by refinancing your credit card debt
• Your credit score is good enough to qualify for a lower APR on another credit card or a lower interest rate on a loan
• Your credit score may benefit from lower credit utilization by increasing your total available credit when you open a new credit card

When is credit card debt refinancing a bad idea?

You may want to avoid refinancing if:

• You don’t remember to pay your bills on time, so opening another credit card may add to the problem rather than help
• You can’t qualify for a 0% intro APR or low APR credit card, or a low-interest loan
• Balance transfer fees eliminate or minimize the benefits of refinancing
• You won't be able to pay off the card by the time the introductory 0% APR ends

How to refinance credit card debt

As for how to refinance credit card debt, there are several different ways to do it:

1. Use a balance transfer credit card
2. Consider a personal loan
3. Use your home equity
4. Borrow money from your 401(k)
5. Consider a debt management plan

When evaluating your options, think about your credit history, cash availability, income level, and debt size. You can also consider whether you want to lower monthly payments or pay off debt quickly.

1. Use a balance transfer credit card

Consider a balance transfer to a lower APR credit card to save on interest. Ideally, select a card offering an introductory 0% APR for over a year.

But keep in mind that you might need to make a balance transfer within a certain period after account opening to qualify for the intro rate or get a lower fee. For example, the Chase Slate Edge℠ card’s balance transfer fee is $5 or 3% of the amount of each transfer, whichever is greater in the first 60 days, then $5 or 5%.

If you don’t qualify for a 0% intro APR card, you can still refinance by finding a lower APR card. Even a slightly lower APR can result in significant savings over time.

I like a balance transfer because it’s a relatively simple way to manage your debt. This method is best for those with small debt amounts that can be paid off within a year or so. Transfer limits typically match your new card’s credit limit, so if you can’t transfer all your debt, focus on the debt with the highest interest rate.

2. Consider a personal loan

A low-interest personal loan can be a viable option for credit card refinancing or debt consolidation. Debt consolidation loans often offer lower interest rates than credit cards, but may require good credit for loan approval and excellent credit to qualify for the best rates.

Getting a credit card consolidation loan can help manage payments. I especially like this option for paying down a significant amount of debt. It allows you to borrow from a few thousand to tens of thousands of dollars, transferring your high-interest credit card debts to your loan.

However, if you plan to pay off your debt in less than five years, consider using a balance transfer credit card with an APR introductory period. This could be more cost-effective as new loans may have origination fees on top of other charges, such as interest, late payment fees, and prepayment penalties, depending on the loan terms.

Explore your loan options in our list of the best personal loans.

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3. Use your home equity

If you own a home, you can tap into your house's value and take out a home equity loan or home equity line of credit:

• Home equity line of credit (HELOC): If you’re getting a HELOC, it works a lot like a credit card. You can borrow up to a certain limit, and during the draw period, you only pay interest on the amount you borrow. Once the draw period ends, you'll need to repay the entire loan amount, including the principal.
• Home equity loan: A home equity loan gives you a lump sum with a fixed interest rate, and you pay it back in an agreed amount of time.

Both home equity loans and HELOCs could be used to help you pay off credit card debt at a potentially lower rate.

A home equity loan or HELOC is a good option if you have a lot of credit card debt to refinance and want to pay it off over a long period of time, typically 10 or more years. As these loans are secured loans, the money amount you can borrow depends on your home equity.

Shop around at credit unions or online lenders to find the best rates. Keep in mind that (as usual) the lowest rates of interest tend to go to people with the highest credit scores.

4. Borrow money from your 401(k)

If you have bad credit and can’t qualify for other options, you might consider a 401(k) loan. This doesn’t require established creditworthiness and may offer lower rates than credit cards. The loan repayments and interest charges go back to your retirement account, not to a bank or financial institution.

You can only borrow up to 50% of your 401(k) balance, up to $50,000. The IRS requires repayment within five years, and you can typically take out one 401(k) loan at a time.

While this can work very well provided that you follow the requirements and repay the loan as required, it also could put your retirement at risk. You might have to repay your loan in full suddenly if you lose or quit your job. Failing to repay your loan could impact your retirement and may have tax implications, especially if you’re under 59.5 years old.

5. Consider a debt management plan

You can seek credit counseling services if you’re overwhelmed and don’t know where to begin regarding your debt. Certified credit counselors can help you with budgeting and money management, but they may also help you devise a debt management plan and negotiate with creditors.

Debt management plans typically require you to deposit money with the counseling organization, which they use to pay your creditors, usually for a fee.

A debt management plan can be beneficial if you struggle with timely payments and need someone to negotiate lower rates and follow a payment plan for you. They can often negotiate lower payments or bring down higher interest rates and help you clear your debt in 36 to 60 months.

If you choose this path, vet your options carefully. Look for organizations accredited by the National Foundation for Credit Counseling (NFCC) and research thoroughly to avoid ones you shouldn't trust.

Closing credit accounts may be a requirement of your plan. While on one hand this is a good thing, as it can prevent you from taking on more debt, it may be unrealistic and put you in a difficult situation.

Our recommended balance transfer credit cards

A balance transfer credit card could help you transfer existing credit card balances to a new card with a lower APR. Your best option is one that offers 0% intro APR for a limited time. Each of the cards included here also have no annual fee.

Credit card	Intro APR	Balance transfer fee	Annual fee
BankAmericard® credit card	0% intro APR on qualifying balance transfers for 18 billing cycles for any qualifying balance transfers made in the first 60 days (then 15.49% - 25.49% Variable APR) 0% intro APR on purchases for 18 billing cycles (then 15.49% - 25.49% Variable APR)	3% for 60 days from account opening, then 4%	$0
Wells Fargo Reflect® Card	0% intro APR on qualifying balance transfers for 21 months from account opening on qualifying balance transfers, then 17.49%, 23.99%, or 29.24% Variable APR 0% intro APR on purchases for 21 months from account opening, then 17.49%, 23.99%, or 29.24% Variable APR	5%, min: $5	$0
Citi Double Cash® Card	0% intro APR on balance transfers for 18 months, then 18.49% - 28.49% (Variable)	3% of each balance transfer ($5 minimum) within 4 months of account opening; then 5% of each transfer ($5 minimum) after the 4 month intro period ends	$0
U.S. Bank Visa® Platinum Card	0% intro APR on balance transfers for 21 billing cycles (after that the rate increases to 17.99% to 28.99% (Variable) APR) 0% intro APR on purchases for 21 billing cycles (then 17.99% to 28.99% (Variable)	5% of the amount of each transfer or $5 minimum, whichever is greater	$0
Chase Slate Edge℠	0% introductory APR on balance transfers for 18 months (then 19.74% to 28.49% Variable) 0% introductory APR on purchases for 18 months (then 19.74% to 28.49% Variable)	$5 or 3% of the amount of each transfer, whichever is greater in the first 60 days, then $5 or 5%	$0

How to pay off credit card debt faster without refinancing

Refinancing can offer benefits that speed up your debt payoff journey, but I’d recommend looking into other options to decide whether you need that step.

Focus on your budget

It’s always a good idea to do an audit of your budget before taking on any new loans or refinancing debt. If you’ve never tracked your income, that’s a good start. Try one of these budgeting apps if you need a tool to assist you.

I’ve been shocked sometimes to realize where I’ve been spending more than I thought, and if I have debt to pay off, I look for ways to cut back on expenses and divert the extra money toward debt.

Increase your income

Easier said than done, right? Listen, I get it — not all of us have spare time to start a side hustle or a job where raises or overtime are possible. But if you’re struggling with debt, it can’t hurt to consider ways of bringing in more income.

If you have a few hours per week, you might be able to take on flexible gig work like becoming a rideshare driver or trying a side hustle for introverts like housesitting or delivering groceries. Maybe you only need to work extra for a few months to make a significant dent in your debt totals.

Try the debt avalanche

A very popular strategy is called the debt avalanche method and it relates to how you prioritize your debts. Between the avalanche and the snowball (more on that below), I prefer the debt avalanche because math-wise, you’ll be debt-free sooner.

With the avalanche, you list all of your debts along with their amounts and interest rates. Then, pay minimums on every debt, but put any excess funds toward paying off the debts with the highest interest rates first. You can use this method with not only credit card debt, but other debts like vehicle loans.

As each debt disappears, you free up more money to put towards the lower-interest debts, continuing until it’s gone.

Use the debt snowball

The debt snowball method is another well-known framework for paying off your debt. You list your debts and amounts, but don’t worry about the interest rates.

Instead, you prioritize paying debts with the smallest dollar balances. (You always keep paying at least the minimum required to each credit card or other creditor.)

The idea behind the debt snowball is that it gives you quick wins. If you have three debts in the amounts of $400, $1,500, and $10,000, it makes sense to take care of the $400 debt as soon as possible. Then you have fewer debts to worry about.

*Note: If you choose to refinance credit card debt, that eliminates the need for a debt snowball or avalanche, since you no longer have separate debt accounts.

Credit card debt refinancing vs. consolidation

Credit card debt refinancing is one of several ways Americans can tackle their debt. Another common method is known as credit card debt consolidation. This method is most often used to reduce the number of outstanding balances a person has by paying off their credit cards using one credit card, personal loan, or other means.

Credit card debt refinancing can be a type of debt consolidation if you’re transferring balances from more than one card to a new card and rate. Credit card debt consolidation combines or consolidates your credit card debts by paying them off with a loan or other means, so you only have one monthly payment toward the debt payment method you used.

Credit card debt refinancing and consolidation can have slightly different goals:

• Credit card debt refinancing: Often used to reduce interest rates
• Credit card debt consolidation: Often used to simplify your credit card bills by combining them into a single bill

Learn more about the differences between credit card debt refinancing versus debt consolidation.

Alternatives to refinancing credit card debt

There are several alternative options to credit card debt refinancing that can help you improve your financial situation, including debt settlement, debt management, and bankruptcy.

Use a debt management plan

Setting up a debt management plan often begins by contacting a credit counseling agency that can help negotiate your debt and repayment terms. The agency can then establish a repayment schedule for you to pay off your debt.

Credit counseling agencies act as a middleman between you and your creditors. Sometimes, you may directly pay the credit counseling agency, and then it pays your creditors.

Credit counseling agencies can be both for-profit and nonprofit organizations. Even nonprofit agencies may charge small fees. When vetting your options, make sure to work with an organization accredited by the National Foundation for Credit Counseling (NFCC).

Seek debt settlement

In some cases, a lender may be willing to settle your debt for less than what you owe. Credit card companies may consider a debt settlement to ensure you don’t file for bankruptcy, which may eliminate the debt.

It may be worth trying a DIY version of debt settlement. Call your credit card issuer and ask if they are willing to settle your debt for a lesser amount. (I’ve never done this, and it sounds daunting, but I know people who have successfully negotiated their debts.)

Alternatively, you can also use a debt settlement company such as Freedom Debt Relief to benefit from its experience. However, beware of the risks to your credit and the fees you’ll have to pay if the settlement goes through.

Find out more in our Freedom Debt Relief review.

Our recommended debt relief services

One of the methods to restructure your credit card debt is by getting help from debt settlement or debt relief companies. Here are some of the most reputable.

Consider bankruptcy

If your situation is more dire and debt settlement won’t work, you may need to think about bankruptcy. Though this handles your debt, I want you to realize that it’s not an easy fix, so you should consider this only if you’ve exhausted all other avenues.

There are several pros and cons to bankruptcy, but instead of viewing bankruptcy as a failure, consider it a way to restructure your finances. It helps you discharge certain debts, stop collection calls and wage garnishments, and relieve your financial stress.

Depending on your situation, you may qualify for Chapter 7 or Chapter 13 bankruptcy. Both bankruptcy types can help you move past certain debts. However, you may lose certain assets and damage your credit score for several years.

Chapter 7 bankruptcy typically liquidates some assets and allows you to discharge most unsecured debts, while Chapter 13 bankruptcy involves creating a repayment plan to pay off your debts over a period that normally lasts 3 to 5 years.

FAQs

Bottom line

Credit card debt refinancing is a tool you can use to manage your credit card debt and pay it off over time. Credit cards with high APRs can be challenging to pay off because so much of your monthly payments go toward interest charges.

It can be a good idea to refinance credit card debt if you qualify for a lower APR, which means you’ll pay the debt off more quickly and pay less overall. There are other versions of this, and a consolidation loan can be another form of refinancing.

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