Credit card refinancing: What is it?
Credit card refinancing is a strategy for paying off credit card debt by using another credit card or a personal loan with a lower interest rate. Reducing the interest could put more of each payment toward the debt.
What you’ll learn:
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The benefits of refinancing include saving money on interest and—if the refinancing involves consolidating debt from more than one card—combining several monthly payments into one.
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You might refinance credit card debt through a credit card promotional interest rate or a balance transfer.
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Refinancing a credit card won’t eliminate the debt you owe.
What is credit card refinancing?
Credit card refinancing is the process of paying off a credit card balance using another loan. People often refinance credit card debt to try to save money on interest and simplify payments.
How to refinance credit card debt
There are several ways to refinance credit card debt, including:
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Using a balance transfer credit card: A balance transfer can help you move debt from one or more credit cards to another credit card with a low promotional interest rate.
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Taking out a debt consolidation loan: This is a type of personal loan that can roll debt from several credit cards—and other types of debt like medical bills—into one account. A debt consolidation loan may save you money if you get good terms and make your payments on time.
Potential benefits of credit card refinancing
A balance transfer with a promotional rate can temporarily lower your interest rate and help you save money. Your monthly payments can then go toward paying off more of the card account’s principal balance.
Refinancing your credit card with a debt consolidation loan could also help you save money on interest if the loan comes with a lower rate.
In addition, consolidating multiple card balances with a balance transfer or personal loan can leave you with fewer payments to manage.
Reasons to consider refinancing credit card debt
Credit card refinancing might be a good option if you:
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Qualify for a 0% introductory APR
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Can pay off your balance before the introductory period ends
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Qualify for a balance transfer offer
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Can lower your monthly payments
Important considerations of credit card refinancing
It’s important to remember that refinancing won’t eliminate what you owe. You may also need to pay fees if you’re transferring a balance from one card to another. Also, promotional interest rates don’t last forever.
Applying for a new credit card or loan and opening a new account could affect your credit scores. When you apply for a new account, your credit score may drop slightly when the lender checks your credit. But as you demonstrate your ability to manage the new debt by making payments on time, your scores could increase.
Credit card refinance FAQ
Here are answers to some common questions about credit card refinancing.
Is it good to refinance a credit card?
Determining whether refinancing is right for you depends on your financial situation and goals. Comparing fees, your ability to make on-time payments, and whether you can pay off a balance transfer card before the promotional period ends and the interest rate goes up could help you decide whether refinancing is right for you.
Does refinancing a credit card hurt your credit?
Refinancing a credit card can temporarily lower your credit score slightly, according to FICO. This could happen because of a hard credit inquiry when you apply.
In the long term, consistently paying down loans can stabilize credit scores and may even improve them, because you’re demonstrating your ability to pay on time.
Key takeaways: Credit card refinancing
Credit card refinancing usually involves taking out a lower-interest credit card or personal loan to pay off your debt on an existing credit card. Paying off the new balance over time can reduce interest costs and simplify your monthly payments.
If you’re interested in transferring balances to a new card, you can see if you’re guaranteed to be approved before accepting a Capital One credit card offer.
