Steps for refinancing credit card debt
Quick insights
- Credit card refinancing could refer to several debt management options, including balance transfers and debt consolidation.
- Refinancing a loan or line of credit can be a worthwhile process if your interest rate and monthly payments become lower.
- In addition to refinancing, there are several strategies that could help someone get out of credit card debt.
Refinancing is like giving a loan or line of credit a makeover. The result is usually a lower interest rate and different monthly payment. The same is typically true when refinancing credit card debt.
In this article, we’ll review the credit card refinancing options available to most people, along with some general strategies for repaying a credit card balance.
What is credit card refinancing?
Credit card refinancing could refer to several processes that potentially lower interest rates and adjust monthly payments to make debt more manageable for a person. The intended outcome is usually to help save money and get out of debt.
Credit card refinancing options
Several processes can help you refinance credit card debt, make it more manageable and even pay off what you owe. When considering one of these, it’s important to understand the terms and conditions of each option available to you before making a choice.
Balance transfers
This is like moving your debt from one credit card to another. Balance transfer offers and promotions usually have a small fee; however, they also tend to have a low or no interest rate for a certain period. That could result in lower monthly payments and less interest accruing as you make payments toward a balance you transfer to a new credit card.
A bank may contact you proactively with balance transfer offers available to you. Offer terms vary by institution and usually have promotional interest rates and payment requirements for a certain period of time. Depending on the exact terms, a balance transfer offer may be a good way to refinance existing credit card debt.
Personal loans
This is the process of borrowing money from a financial institution to pay some or all of an existing debt. A personal loan may give you the funds needed to pay off a credit card, for example. If the interest rate, monthly payment and other terms of a personal loan work for you, then it may be a good choice of credit card refinancing.
My Chase Loan®
This is a feature that allows eligible Chase cardmembers to borrow money from their existing card’s available credit. You would pay back a My Chase Loan over a time period that is based on the loan amount, with a fixed APR that is lower than the credit card’s standard purchase APR. Funds are deposited into the cardmember’s bank account, usually in as little as 1-2 business days, and can be used for whatever they need—including paying off other credit card balances and consolidating monthly card payments.
Consolidation
Debt consolidation is a process that involves taking out one loan to pay off multiple debts. The result is often a single payment—often at a lower interest rate, as well. You usually still have to make payments on a set schedule in order to pay off the consolidated debts successfully, but this could be a good strategy for refinancing your credit card debt.
Chase Pay Over Time℠
You might make a large credit card purchase that you wish you could finance by itself—maybe a new home appliance or special holiday gift. Chase Pay Over Time may help you better manage your budget by lowering the credit card statement amount that is due per month. This is done by creating a pay over time, or installment plan, on eligible purchases.
Although it isn’t the same as refinancing credit card debt, Chase Pay Over Time can help you financer larger purchases.
Credit card refinancing vs. credit card debt consolidation
Credit card refinancing refers to various options that tend to result in different terms for your existing debt. The intended results are usually an interest rate and monthly payment that work better for your budget and possibly save you money.
Consolidating your credit card debt is a specific refinancing strategy in which you take out a single loan to pay off multiple debts. Usually, this is achieved by rolling all your credit card debts into a single loan, then making payments on that loan to eventually pay off the debt.
Credit card repayment strategies
Unless you can pay off a credit card outright, paying one off takes time. However, there are some strategies that could help you pay down your credit cards month in and month out.
Calculate the most you can afford to pay
To calculate how much money you can put toward paying down a credit card balance, review your monthly budget. There will probably be expenses you have to pay every month like food and electricity. Try to identify spending you can cut back on. Any additional funds could be put toward a debt and help to pay it down more efficiently.
Make additional payments
Making an extra payment on a credit card atop your required monthly payment can create some progress toward paying down the balance. Making extra payments can help you save money on interest charges that would otherwise accumulate on unpaid balances every month. The more you pay, the more likely you could pay down the balance, even as new interest accrues.
Over time, making additional payments toward your credit card balance can reduce the total amount you owe. This strategy could eliminate a credit card debt sooner than making just one payment each month, especially if that has been only the minimum amount due.
For additional strategies for repaying credit cards, read our 7 tips to get out of credit card debt.
