Debt Consolidation

Why Debt Consolidation is a Bunch of Crap – Don’t Consolidate Your Credit Card Debt



Sorry for the expletive – now you know how I really feel about debt consolidation.

If you have considered or are considering a debt consolidation loan before you make that move read this first.

What is Debt Consolidation?

Debt consolidation is when you take out a loan to consolidate other forms of debt. For example, you may take out a loan from your local bank to pay off your credit cards, student loans or vehicle loans. 


Why Debt Consolidation is a Bunch of Crap - Don't Consolidate Your Credit Card Debt


Debt consolidation is a means of reducing the number of “debt” accounts you have so you have a single loan payment and generally a lower interest rate.  The idea is that if you can consolidate all your payments into a single payment and a lower interest rate you will have a better chance of paying off all your debt.  (At least that’s what your financial institution or credit card companies offering a 0% balance transfers will tell you.) Debt consolidation is sometimes used as a means to improve your credit score.


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Does debt consolidation work?  Nope!  (Some will argue that it does and for some, it will, but for most – Nope!)


My Story

Many years ago when I graduated from college and received my first “real” job, I made the determination, because of my new income level that it was acceptable to have three credit cards.  Most of this was due to the fact that I was making more money than I had ever made before and all that money gave me a sense of confidence – that I could pay for anything, including managing my credit card debt.

About a year after using those credit cards I found myself with some pretty high card balances and knew I probably needed to do something to get them paid off. 

Enter debt consolidation.

I used a 0% balance transfer offer through one of those credit card companies (you know the ones that advertise on TV and all over the Internet)  to consolidate all my debt onto one credit card.  I had a year to pay off the new credit card with no interest so I figured I was in pretty good shape and on track to eliminating my debt.



Why Debt Consolidation is a Bunch of Crap - Don't Consolidate Your Credit Card Debt



Fast forward one year later.  How many credit cards did I have? 4

The credit card I had transferred my other balances to never got paid off.  In addition, the other three credit cards I had now had new balances.  For me, debt consolidation only made my situation worse.

You’re probably thinking that debt consolidation would have worked for me if I had a little more self-discipline. 

Of course, you’re right, but at the time I was young had a new job and as far as income goes the sky was the limit. I believed that more money would eventually fix my credit card problem.





What You Need to Know

I eventually dug my way out of debt and if you’re in debt you can too. But before you head down the debt consolidation road, here are two perspectives you need to understand first.


  1. The only ones that really promote debt consolidation as a debt pay off strategy are those companies that provide credit – banks, financial institutions, and credit card companies offering a 0% balance transfer. That’s because they are in the business of making money by loaning you money so you can pay them for your debt.  They understand that if you’re struggling with debt it’s unlikely you will pay off your loan earlier or make more than the minimum payment on the loan.
  1. This is the big one. Using credit to make purchases is a behavioral trait or habit.  It’s not about interest rates or a single loan payment and it’s definitely not about debt consolidation.  If you believe it’s acceptable to use credit cards to make purchases then it’s likely regardless of how often you consolidate your debt, you will end up back in debt.  Change how you think about the use of credit.  Make the decision not to use credit to make purchases and you will manage your way out of debt.


For me, once I made the decision to not use credit as a means of purchasing items I was able to work my way out of debt in no time. 


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Disregard all the advertising mumbo jumbo you hear in the media about debt consolidation. And start by challenging your beliefs about why you’re spending and why you need to use credit in the first place.

Changing your beliefs and then your behaviors will get you out of debt.  Consolidating your debt will only keep you in debt longer.


Helpful Resources:




Stop Living Paycheck to Paycheck



What are Your Thoughts on Debt Consolidation? Comment below.



Kevin is the owner of FTP and an author of the personal finance book series Filling The Pig. He uses his own past successes with debt, saving cash, investing and running his own home based businesses to teach others about Creating a Lifestyle of Opportunities.


4 thoughts on “Why Debt Consolidation is a Bunch of Crap – Don’t Consolidate Your Credit Card Debt

  1. Wish I had found you last week – just did a balance transfer to consolidate debt – none were too large, just there if you can understand that feeling. Only good thing is, it was to a card I already had, and only had a transfer fee of 1%. Now I just need to pay it off in 8 months – and pry the cards from my hubby’s hands so he doesn’t use them again . . . any suggestions for that?

    • Lisa, thanks for writing. Have been down the debt consolidation path myself and understand the feeling. The first step to fixing any problem, including debt, is self-awareness – sounds like your already there. As far as your hubby goes. From my own past experience, I can tell you that having your spouse on board makes the whole debt payoff process a lot easier and faster. I would recommend both of you sitting down adding up all your credit card payments and then discussing what your future would look like if you didn’t have them. From the perspective of the opportunities that would be created without debt – your stress level, lifestyle, where you live and how you live. I can tell you that once I kicked my credit card debt it was one of the most liberating things I ever did. If you haven’t already you may want to check out this article on using only one credit card – it may help with the transition process How Many Credit Cards Should You Have? My Credit Score with One Credit Card

      Thanks again for writing – stay focused, and stay the course you will get there.

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