If you’re dealing with credit card debt, maybe you’ve thought about debt consolidation as an option to help you manage your accounts. While debt consolidation can sound good on the surface, there are real potential problems if you go that route.

Let’s explore what debt consolidation is and why you might want to look into other options to help you get out of credit card debt:

What is Debt Consolidation?

Debt consolidation is simply the act of combining various smaller debts into one larger debt. For example, you would transfer all of your credit card balances to a single credit card, or perhaps you would take out a loan to pay off your credit card bills but then you would have that larger single loan payment to worry about. Why might this be a bad thing?

Spreading Debt Out Minimises Some Types of Risk

If you’re already struggling to pay your monthly credit card bills, you might put even more pressure on yourself by consolidating the debt. Why? Because that single larger payment is going to be difficult to make if you can’t even cover your smaller payments.

Think of it this way. Let’s say you have five credit cards. The interest rates are too high, which makes it tough to get the debt under control. You usually end up owing about $500 per month in total. If you consolidate with a loan, you find out that you could end up with a $400 payment instead. It sounds ideal. Then again, you have months where you can’t even afford half of your minimum payments, meaning you’ll have months where you can’t afford that $400 payment.

With debts spread out between multiple credit cards, you can at least pay off some of those minimum payments due each month even if you can’t pay them all off. Yes, you could still push a card or two into default. But you’ll still have accounts with positive histories on your credit file as well. With a single larger debt, if you go into default that’s all people checking your credit history will see about your recent activity.

Debt Consolidation Can Make Future Changes More Difficult

There’s another potential problem with debt consolidation. While you might have the option to transfer your balances now, once you have a single larger debt it might be very difficult to make further changes. Let’s say your overall balance is $14,000. Split between 8 credit cards, you had the option to get a balance transfer if the interest rate became too inflated on any one card. With that larger card balance or loan, you would be hard-pressed to find another option if the terms didn’t work out as well for you as you hoped.

Debt consolidation isn’t all bad, but it isn’t a cure-all either. Before deciding if consolidating credit card debts is right for you, be sure to look at both sides and weigh all of your options carefully.