John Wants to Know “If I Consolidate My Debt On One Account Will It Hurt My Credit Score?”

“Dear Steve,

I opened up too many credit card accounts in the past two years i recently joinend a credit union bank which offered me a chance to put all my credit cards under one account. I owe about 3,000. I also only make about 1,400 a month so at times I’m only able to make minimum payments

Will putting all my credit card accounts under one credit effect my credit score


Dear John,

It only makes mathematical sense to consolidate your debt from those credit card accounts to a single card if the interest rate the credit union if offering you is significantly better. Essentially what you would be doing is an unsecured debt consolidation loan from two cards to one. But you need to be aware that if you maintain your checking account at the same credit union as your new debt consolidation credit card and you fall behind on your credit card payments, the credit union may reach into your checking account and take what you owe them. This could create real financial hardship when you can least afford it.

Consolidating your debt could have some negative consequences if you have been making payments on-time on those cards. By closing the two year old cards and consolidating the debt you are essentially closing the door on two good years of positive credit history that helps to improve your credit score.

Consolidating the debt from two cards to one, without a significant interest rate reduction, will not do a whole lot to actually reducing your monthly obligations. For example, let’s say that you owe $1,000 of card A and $2,000 on card B. Your monthly minimum payments on card A would be about $20 and on card B, about $40. If you consolidate the debts into one card with a balance now of $3,000 then the minimum payment on that one card, using the 2% of balance rule would be about $60.

So, bottom line, I think that unless the spread in the interest rate on your current cards to the credit union card is more than 5%, that you may be better off keeping your good credit history and sticking with your current cards.

ALERT: If the credit union is offering you a better interest rate, you should call your current credit card companies and let them know that and ask for them to match the rate. It does not hurt to ask and about 75% of people that ask do get a much lower rate.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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