Are you feeling overwhelmed by credit card debt? If you’ve found yourself in the predicament of owning multiple credit cards and carrying a balance on them all, then you’re probably aware of just how confusing it can be. You’re not just managing multiple payments and due dates, you’re also keeping track of multiple interest rates, payment terms and credit limits.

Credit card consolidation could help you get a better handle on your financial situation. Below, we explore what credit card debt consolidation is, the reasons people choose to consolidate their credit cards, and steps you can take to do consolidate yours.

What is credit card debt consolidation?

Credit card consolidation involves merging multiple independent credit card balances under a single new loan or line of credit. Once the consolidation process is complete, instead of making multiple payments to multiple lenders, you will make a single monthly payment.

It is important to note that credit card consolidation does not magically discharge or erase your debt. It simply replaces your old debt with a new debt, which must still be repaid according to the terms of your agreement.

Why do people consolidate their credit cards?

There are many reasons that someone might choose to consolidate their credit cards. Some of the most common reasons include:

  • A desire for simpler repayment: Balancing multiple payments and payment due dates is a juggling act. Some borrowers who have many different credit cards choose to consolidate their credit cards in order to simplify the repayment process and decrease the likelihood that they will accidentally make a late payment, which could result in expensive late fees and a damaged credit score.

  • A desire for lower interest rates: Depending on exactly how you choose to consolidate your credit card debt, it may be possible to qualify for much lower interest rates compared to what you are currently paying. A lower interest rate means that you can pay off your debt more cheaply and save more money over the life of the loan.

  • A desire to transition to installment debt: Credit cards are a form of revolving debt, a type of loan that allows you to continuously borrow from a line of credit until you reach your credit limit. While revolving debt (like credit cards) can be helpful when used responsibly, it can also cause trouble for some individuals who cannot control their spending. By consolidating your credit card debt with an installment loan (like a personal loan or a debt consolidation loan), some find it easier to pay off their debt.

3 ways to consolidate your credit cards

Before you consolidate your credit cards (or any debt, for that matter), you should first completely audit your financial situation. Ask yourself questions like:

  • How many different credit cards do I currently own?

  • How many of those cards carry a balance?

  • What is my total credit card debt?

  • Do I owe any other debt, like student loans or a mortgage?

After conducting this audit, you should sit down and create a monthly budget for yourself so that you have a clear idea of how large of a monthly payment you can realistically afford. Once this budget is created, you can consider your options below.

1. Use a balance transfer credit card.

One of the most commonly used methods for consolidating credit card debt is the use of a balance transfer credit card.

Balance transfer credit cards work like this: When you open an account, you are given the opportunity to move credit card balances from other cards to your new account. (This is, in effect, the definition of a “balance transfer.”) Lenders and credit card companies specializing in balance transfer cards will often offer special introductory interest rates as low as 0% APR for a certain period of time in order to entice borrowers to sign up. How long this introductory period lasts varies from lender to lender and from card to card, but often falls somewhere between six and 18 months.

Because of this low (or nonexistent) introductory APR, a balance transfer can help certain borrowers pay off their credit card debts faster and more cheaply compared to slogging away making payments on their existing cards. That being said, there are some risks that should be considered before you jump at the opportunity to open a balance transfer card:

  • Most offers require a good or excellent credit score: These kinds of credit cards carry a lot of risk for lenders, who want to make sure that they will be able to recoup their money. For this reason, most companies offering balance transfers will not lend to borrowers who have credit scores below what is considered “good.”

  • Most offers will charge a fee: If a customer opens an account, transfers their other balances over to it, and pays off their debt before the introductory period ends, the lender makes no money. In order to recoup some of the administrative costs associated with marketing and opening these new accounts, most lenders charge a balance transfer fee. This fee can be anywhere from a few dollars to as high as 3 to 5 percent of the total amount transferred, so be sure you understand what you will be expected to pay.

  • The introductory period (and APR) will end: Even the best balance transfer cards do not have introductory periods that last forever. Once the promotion ends, you will be on the hook for paying monthly interest on the balance that remains.

  • This doesn’t address the root issue of overspending: If you carry balances on multiple credit cards, there is at least some possibility that you might have trouble controlling your spending. In this case, a balance transfer does not keep you from racking up additional debt. In fact, by removing the balances from your other credit cards, it could encourage you to spend even more and get even further into debt.

2. Take out a personal loan or debt consolidation loan.

Another option is to apply for a personal loan (sometimes called a debt consolidation loan) through either a bank, credit union, or other lender, which you will then use to “pay off” your outstanding credit card balances. Doing so effectively consolidates your old credit card debt into a single new debt. Consolidating your credit card debt with a personal loan or debt consolidation loan does offer a number of key benefits.

The first is that personal loans will often carry much lower interest rates—as low as 5 percent in some cases—compared to credit cards. (Your exact interest rate will of course be determined by a number of factors, including your credit score and credit history.)

The second is that consolidating your credit cards with a personal loan effectively converts it from revolving debt into installment debt, which can offer a small boost to your credit score. This can also help you rein in your spending, as it does not give you access to an additional line of credit like a balance transfer card would.

Again, though, there are some considerations to keep in mind before using a personal loan to consolidate your credit card debt:

  • Not all borrowers will qualify: Like any other lender, companies offering personal loans or debt consolidation loans want to ensure that they will get their money back—along with some profit. For this reason, in order to qualify for the best interest rates you will need to have an excellent credit score. It can be difficult to qualify for a loan with a poor credit score.

  • You will likely pay a loan origination fee: As with balance transfer cards, when you borrow a personal loan you will likely be charged a loan origination fee (typically between 1 and 5 percent of the amount borrowed), which can reduce how much savings you realize through the process.

3. Sign up for a debt management program.

Debt management (also called credit counseling) is a special service offered by organizations that specialize in helping borrowers create a plan to repay their debt and get their credit health back on track. In addition to reviewing your entire financial situation and understanding your financial goals, these organizations educate their clients to help them bring their spending, budgeting, and other concerns under control.

While the exact scenario will differ depending on the kind of organization you choose, many debt management organizations will work with your lenders to negotiate lower interest rates or waived fees on your behalf (though there are no guarantees). Typically, you make a single monthly payment to the debt management organization, who then divvies up funds directly to your various lenders.

As with the above options, there are some considerations to this approach of credit card consolidation:

  • You may need to pay a fee: Most credit counselors/debt management plans will require clients to pay a monthly fee. This fee is often below $100 per month, though this can vary depending on the state in which you live and the rates charged by your specific counselor. Many credit counselors will be willing to work with you on price, and some may even be willing to work with you for free, depending on your financial situation.

  • You might not have access to your credit cards anymore: Some credit counseling agencies will not work with a customer until they agree that they will not open a new credit card or leverage an existing line of credit. This is to ensure that you will not end up deeper in debt.

  • There are scams out there: Hope can be a powerful tool. And false hope, in the hands of a scammer, can be dangerous. Scammers often pose as debt management companies because they understand just how enticing a promise to help you pay off your debt can sound. The problem is so common that the Federal Trade Commission (FTC) has created a webpage dedicated to helping individuals spot these ploys. When in doubt, before making any payments or supplying any sensitive information (like your Social Security number), check for complaints filed with the Better Business Bureau, CFPB, or your state’s Consumer Protection Agency.

Other options

There are a number of other strategies that borrowers can use to consolidate their credit card debt which aren’t recommended because many of them carry a certain level of risk.

For example, some borrowers choose to use their retirement savings to pay off their debt, which is generally ill-advised. Not only does this strategy mean that you’re cutting your retirement funds short but it could also open you up to substantial taxes and fees.

Others might choose to leverage a home equity loan or do a cash-out refinance of a car loan (where you replace your current auto loan with a new loan and then receive an extra amount that you get back in cash when the loan closes) to consolidate their credit cards. While this can be an effective way of simplifying your debt and even of lowering the interest rates you’re paying, it can also present substantial risk.

How? Because it is effectively converting unsecured debt (your credit card debt, which is not backed by collateral) into secured debt (like your mortgage, which is backed by your home or a car loan, which is backed by your vehicle). This can be dangerous should you ever fall behind on your payments, potentially causing you to forfeit your home or vehicle.

Consolidating your credit card debt can be an effective way to bring your debt under control and potentially repay it more quickly than by following your original repayment plan. But it’s important that you choose the method that is best for your unique financial situation and goals. In fact, consolidating your credit cards without addressing an underlying spending problem could even exacerbate your problems.

Investing involves risk including loss of principal. This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.