Chances are you’re carrying plastic in your wallet and racking up credit card debt to go with it.

According to a 2017 ValuePenguin report, the average American has between two and three credit cards and a total outstanding balance of $5,551.

That isn’t surprising considering the fact that Americans owed $834 billion in credit card debt at the end of 2017, according to a quarterly report on household debt and credit from the Federal Reserve Bank of New York. That’s a $26 billion increase from the previous quarter.

On the national level, an uptick in household spending can be a sign of a strong economy. But for the individual, credit card debt can be difficult to pay off.

If you’re struggling with credit card debt, consolidation could be a useful tool. Before you dive into the process of credit card consolidation, however, ask these five questions to figure out if it’s the right financial move.

1. Can I lower my interest rate?

When you consolidate credit card debt, you combine multiple debts into one new loan with the goal of achieving better repayment terms, including a lower interest rate. There a few ways to consolidate, including:

  • Taking out a personal loan
  • Using a balance transfer
  • Borrowing via a home equity line of credit

Whichever approach you choose, consolidating helps only if you can lower your overall interest rate, which could help you pay off your debt faster. The average credit card has a 16.15% interest rate, according to

For example, let’s say you owe $5,000 on your Mastercard and $4,000 on your Visa. Your monthly payments are $200 and $125, respectively. For the sake of simplicity, let’s assume both debts have an interest rate of 18%.

After using a credit card consolidation calculator, you decide to consolidate your debt by taking out a $9,000 personal loan at a 9% rate. You choose a three-year term, and your new monthly payment is $286.

Not only did you lower your monthly payments by $39, but you also saved $1,397 in interest by lowering your interest rate. Thanks to credit card consolidation, you can lower your monthly payments and pay back your debt ahead of schedule.

2. How quickly can I pay off my debt?

Snagging a lower interest rate might seem like a win, but you also should consider your debt payoff schedule.

If you go with a variable interest rate on a personal loan, for example, the rate could increase over time. In 2017 alone, the Federal Reserve raised interest rates three times. If you lower your interest rate today with a variable-rate loan, in a few years, your rate could be higher than what you had on your original loans.

Consolidating your credit card debt by using a balance transfer also might be a temporary solution that doesn’t help in the long term. With this method, for example, you would transfer your credit card debt to a new card with a promotional 0% annual percentage rate (APR).

In effect, you’re eliminating interest but only for a limited time. Promotional 0% APR offers typically last a year to 15 months. So if you can’t pay off your debt in that time, you’ll be back to square one.

Before you consolidate your credit card debt, consider how long it will take to pay it off. Make sure consolidation isn’t just a short-term solution but one that will boost your financial bottom line for years to come.

3. Am I spending money on additional fees?

Interest isn’t the only cost of borrowing to take into account when you’re eyeing credit card consolidation.

You also need to consider fees. For example, some lenders charge an origination fee when they disburse a new loan.

Upstart, for instance, charges an origination fee of 0% to 8%, which could add up to $720 on a $9,000 loan.

Credit cards also charge a balance transfer fee. If a card were to charge a 5% fee on the amount transferred, that would amount to $450 for a transfer of $9,000.

You also should be careful about credit card consolidation scams that promise debt relief if you pay for their services. Beware of any companies that offer quick and easy debt payoff in exchange for your hard-earned cash.

Legitimate lenders can help you pay off your credit card debt with a consolidation loan. But remember to account for extra fees so you don’t end up spending more money than you save.

4. Am I putting my home at risk?

You should be cautious about putting up collateral, such as your home, to take out a secured loan or a home equity line of credit (HELOC).

If you can’t repay the balance, you could lose your home. So think twice before taking out a HELOC to consolidate credit card debt, especially if you’re not confident about your ability to pay it back.

5. How can I avoid credit card debt in the future?

Credit card consolidation can help you pay off your existing debt, but it might not change your spending habits. If you’re struggling to stay within your budget, you’ll need to make changes to avoid credit card debt in the future.

Write down your monthly expenses and set limits on categories where you tend to overspend. By tracking your income and spending, you’ll have a better sense of your cash flow from month to month.

Then you can create a spending plan that will leave you free from credit card debt.

About the Author:
Rebecca Safier is a personal finance expert. She works for Student Loan Hero.