Can I Still Use My Credit Cards in Debt Consolidation?

If you're feeling overwhelmed by your credit card debt, you may be tempted to turn towards debt consolidation as a possible solution. While consolidation is a viable option for some consumers, you should understand what consolidation is, and what it involves before committing to a consolidation program. In most consolidation situations, you'll still be able to use your credit cards after you consolidate, but that doesn't mean you should.

Debt Consolidation

When you consolidate your debts, you basically take out a new loan to pay back some of your other loans. When you consolidate credit card debts, you use the money from the new loan to pay off old balances. When you do this, there's no requirement that you stop using the paid-off cards, nor are you forced to close those accounts.

Debt Management Programs

Some consumers choose to get debt help by going to a credit counseling service and entering into a debt management program. In this situation, your debt management program effectively consolidates your debt for you. The program then requires that you pay the program a monthly bill, instead of all your other creditors, which the program then uses to pay your creditors for you. Some programs may require that you turn over or cancel your credit cards as a condition of participation.

Balance Transfers

One debt consolidation situation in which you may not be able to use a credit card anymore comes when you use one credit card as a balance transfer vehicle. If, for example, you transfer the balances from several other credit cards and the transferred amounts get you close to or at the credit limit of the card to which you transferred the balances, you won't be able to use the card to make purchases until you pay off some of the balance.

Closing Account

When you consolidate your credit card debts, you may choose to cancel one or more of the recently paid-off accounts. If you do this, you will obviously not be able to use that account any longer. While closing an account can be helpful if you are unable to maintain the discipline to stop yourself from using the card, it can also have a negative impact. Closing that account might actually lower your credit score, especially if you've had your card for a long time and have a good history of timely payments.


About the Author

Roger Thorne is an attorney who began freelance writing in 2003. He has written for publications ranging from "MotorHome" magazine to "Cruising World." Thorne specializes in writing for law firms, Web sites, and professionals. He has a Juris Doctor from the University of Kansas.