Can I Still Use My Credit Card After Debt Consolidation?

Debt consolidation won’t close your credit cards, in most cases. But even if you can keep your cards open after consolidating, using them is not recommended, since new credit card debt can put you right back at square one.

For most people, debt consolidation is a great strategy for managing debt. When it’s done the right way, consolidating multiple debts into one account can help you reduce your interest charges, eliminate certain fees, and even pay off your debt faster.

Understanding Debt Consolidation

Debt consolidation involves rolling multiple debt payments into one. This can be done in a variety of ways, and each method has different implications for how you can use credit cards afterward.

You’re probably most familiar with the debt consolidation option where you use a new credit card or loan to pay off your debt. When you consolidate credit card debt with this method, you’re not required to close your older credit cards. In fact, it’s advisable not to close them, since doing so will reduce your credit scores.

Another, less familiar option for debt consolidation, is enrolling in a debt management plan (DMP). With a DMP, you work with a nonprofit credit counseling agency that seeks to reduce the interest rate on your debt, collects one monthly payment from you, and distributes it to your creditors in agreed-upon amounts.

You are expected to close all of your credit cards when on a DMP, although sometimes you can keep one open. Yes, your credit scores will initially drop as a result, but steady payments to DMPs help you make major improvements to your scores in the long term.

Of course, using credit cards isn’t advisable after any method of debt consolidation since the high-interest charges on credit cards (median rate in 2024 was 24.37%) make them some of the hardest debt to pay off.

In other words, continuing to use a credit card will offset many of the benefits of consolidating.

How to Consolidate Credit Card Debt Without Closing Accounts

Most methods of debt consolidation do not require you to close your credit cards. Here’s a look at your options, and how each one impacts your cards.

Balance transfer credit card

Balance transfer credit cards usually give you an introductory period of 12-18 months where you pay 0% interest on the balances you transfer from other credit cards.

The 0% offer can make these cards attractive for consolidating credit card debt…as long as you can pay off your balance during the introductory period. After that, your interest rates can skyrocket to nearly 30%.

You don’t have to close your credit cards in order to qualify for a balance transfer card, but you do need good credit scores. Additionally, the balance transfer limit on your card will be impacted by your credit scores: the higher your scores, the higher your limit.

Personal Loan

Personal loans sometimes referred to as “debt consolidation loans,” can be a good form of debt consolidation since they have far lower interest rates than credit cards, and they’re easier to qualify for than balance transfer cards.

You don’t have to close your credit cards in order to qualify for a personal loan, but there’s a chance some lenders will ask you to reduce your credit card debt before they approve you.

Secured loan

For lower interest rates than you can get on most credit cards and personal loans, you usually need to take out a secured loan, or a loan where you use your property as collateral. If you want to consolidate debt, you might consider one of these secured loans:

• Home equity loan
• Cash-out refinance

In order to qualify, you’ll have to have equity in your property, meaning it’s worth more than what you owe against it.

Like with personal loans, you may have to pay down some of your credit card debt in order to qualify for a secured loan, but you can still use your credit cards after consolidating.

Debt management plan (DMP)

With a DMP, you don’t need good credit scores to enroll, and you don’t have to pay down your credit card debt beforehand.

You simply need to speak with a certified credit counselor at a nonprofit credit counseling agency to see what you qualify for. The benefits of enrolling in a DMP can include:

• Interest rate reductions to 8%, sometimes lower
• Payments reduced by up to 50%
• Missed payments can be removed from your credit reports
• Late fees can be forgiven

The main drawback is that, in return for these concessions, most creditors will close your credit card accounts.

In some cases, you can keep one credit card out of the program if it has a $0 balance, or if you need it for emergencies. Just ask your credit counselor if that’s an option.

*Income-based fee waivers are available

Tips for Responsible Credit Card Use After Debt Consolidation

Debt consolidation gives you a fresh start. But to take full advantage of the financial reset, you’ll have to stop accruing debt, which means getting away from using credit cards.

How is that possible? For some people, credit cards still feel like a necessity, especially those living paycheck-to-paycheck or facing emergency expenses.

If that’s you, be sure to look for other solutions that cost less than credit cards — considering how high credit card interest charges are, most other payment options are cheaper! Here are some alternatives to consider:

• Have a certified credit counselor look over your budget with you and ask them to recommend other free and low-cost financial resources.
• For service members and veterans, contact your military support organization to apply for an emergency grant or interest-free loan.
• Use a personal loan or payday alternative loan to help cover your shortfall until you can get back to a financially stable place.
• Check into government and local programs that help with the cost of utilities, food, and other necessities.
• Brainstorm ways to temporarily or permanently increase your income.
• Ask a family member or friend for a loan.

As for any credit card debt you have remaining, you can save money on the exorbitant interest charges by paying more than the minimum due and eliminating the debt ASAP.

For a strategy that will help you eliminate credit card debt faster or more affordably, try the debt snowball or debt avalanche method.

The Bottom Line

There are several ways to consolidate debt without losing access to your credit card. But you might want to rethink the goal of keeping your credit cards after consolidating.

The right debt consolidation method could reduce your expenses enough that you no longer need to use a credit card. If consolidating doesn’t do this for you, it’s still a good idea to stop using credit. Instead of turning to a high-interest solution, try thinking of credit cards as an absolute last resource.