Credit Card Refinancing: Is It Right For You?

Kylie Ora Lobell
Mar 29, 2022

It’s easy to get into credit card debt. When you swipe your card, it may seem like you aren’t spending any money at all. You can simply put purchases on your card and worry about them later.

However, when that time comes, it can be extremely difficult to pay off that debt—especially if you have a high-interest credit card. It could take years and years for you to get out of debt. And in the meantime, this debt could wreak havoc on your credit score

If you’re stuck with a ton of credit card debt, and you don’t see how you’re going to get out of it, you may want to consider credit card refinancing to help you get back on track and give you peace of mind. 

What is Credit Card Refinancing?

Credit card refinancing involves moving your debt from one credit card to another with a lower interest rate.

By tapping into this lower rate, you’ll save money on your interest payments and, theoretically, be able to pay your debt down faster. 

The ideal option is to typically find a balance transfer credit card with 0% interest for a certain period of time, like 12 or 18 months.

Repayment then becomes easier, due to the extra time you have to pay your debt without incurring more interest. 

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When Does Refinancing Make Sense?

While a balance transfer sounds like a great idea, there are a few caveats.

One is that after the promotional period ends, you could be faced with higher interest rates on your new card.

This annual percentage rate is going to be based on your credit score and credit history.

The average credit APR ranges from 13.58% to 18.09% on balance transfer cards. Keep in mind that credit cards use variable interest rates, so your rate could change and make it more difficult for you to pay your debt. 

Also, there is usually an initial balance transfer fee, which is 3% to 5% of your total balance. Even if you’re saving money on interest, it might not make sense to use a balance transfer card if this fee is very high. 

You’ll have to weigh the impact that taking out a new card will have on your credit report.

Hard inquiries can temporarily cause your score to drop up to five points.

And, of course, from a psychological standpoint, you may end up using this card up to its credit limit during the introductory period and get yourself into even more debt if you don’t pay it off in time. 

Sometimes, taking out a new line of credit just isn’t worth it if you can’t get your credit card spending under control. 

Credit Card Refinancing vs. Debt Consolidation Loans

Instead of trying to refinance your credit card, you may want to look into debt consolidation.

Credit card debt consolidation involves taking out a personal loan with a fixed rate and then paying off more than one credit card with it.

Instead of paying multiple credit cards monthly, you make one payment to your provider instead and you pay the same interest for the life of the loan, known as a fixed interest rate.

A personal loan is also known as an unsecured loan because you don’t need to back it up with your collateral. 

With a credit card consolidation loan, you could potentially pay a lower interest rate on your new loan, especially if you have good credit or excellent credit.

But you may also have to pay an origination fee on your loan, which will range from 1% to 8%.

You could also get late fees if you make a late payment, or even a prepayment penalty if you pay back the loan early.

Again, just like with a balance transfer card, you’ll need to go through a credit check—and this credit inquiry could lower your score. 

During the personal loan application process, borrowers need to look into different loan options to find the one that’s best.

Make sure you read the repayment terms from each lender to find out about the fees that could apply to your loan offers, as well as the loan rates. 

When is a Balance Transfer Better?

A balance transfer is a better option if you have a smaller credit card balance and you won’t have to pay a high balance transfer fee.

Additionally, it makes sense if you can make the payments within the promotional period and you don’t just pay the minimum balance every month. 

In addition, if the balance transfer is to a card that makes payments easier, such as one connected to the bank you have an account at, the convenience could make it more than worth the transfer.

Credit Card Refinancing Alternatives

If you’re stuck in a rut with your high-interest credit card debt, credit card refinancing could be a good option.

However, it isn’t the only option.

Credit Counseling

You could look into credit counseling, for instance. Usually, nonprofits run credit counseling programs, where counselors help you with debt management.

They may assist you with creating a budget, coming up with a plan to pay your debt, offer you free educational resources and help you obtain your credit report. 

Some credit counseling programs will reach out to your credit card providers, negotiate lower interest rates, and bundle your payments into one monthly payment.

The only issue you’d need to be concerned about is that you may have to close your credit cards in order to do this—which could lower your credit score.

In the long run, it may be worth it, because if you’re debt-free, your score could go up exponentially. 


If you miss payments because you are busy, you could put all your credit card payments on autopay.

The money will be automatically deducted from your bank account by the due date and you won’t have to worry about missing payments and paying late fees. 

Some cards also offer reduced fees if you opt into an autopay program. It never hurts to research your options with your credit card issuer to see where you can save money.

Debt Snowball/Avalanche 

You could also try paying down your debt by following the debt snowball or debt avalanche method.

With the debt snowball method, you pay the lowest credit card balance first, then the one with the second-lowest balance, and on and on until you reach the card with the highest balance. 

You’ll make minimum payments on all your other cards.

With the debt avalanche method, you’ll pay the balance with the highest interest rate first, and then make your way down to the credit card with the lowest interest rate.

You could try both methods to see which one is more effective at paying down debt faster.  

The Bottom Line

Credit card refinancing might be a productive way to pay down your debt with high interest rates and increase your credit score at the same time.

But you should look into all the choices you have before taking out a balance transfer credit card.

Then, once you do your research, you’ll know you’re making the right decision.

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer with over 10 years of experience working with publications like MoneyGeek, Slickdeals, LegalZoom, OppLoans, SoFi and TaxAct. She has also been published in New York Magazine and the Los Angeles Times.

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